Stocks closed lower yesterday, but well off their worst levels of the day, with the S&P recovering more than half their intraday loss, while the Nasdaq recovered more than 60% of theirs.

Yesterday's 3rd and final estimate for Q2'25 GDP came in at 3.8%, up from last month's second estimate of 3.3%.

Weekly Jobless Claims fell by -14,000 to 218,000 vs. the consensus for 238,000. Although, the smoother 4-week moving average was down just -2,750 at 237,500.

Durable Goods Orders rose 2.9% m/m vs. last month's -2.7% and views for -0.5%. Ex-Transportation it was up 0.4% vs. last month's 1.0% and estimates for -0.2%. And Core Capital Goods were up 0.6% vs. last month's 0.8%.

The International Trade in Goods report showed the balance improving to -$85.5 billion vs. last month's -$102.8B. Imports fell -7.0%, while Exports fell -1.3%.

Retail Inventories were flat (0.0%) m/m vs. last month's 0.1%. Wholesale Inventories slipped -0.2% vs. last month's 0.1%.

Existing Home Sales came in at 4.0 million units (annualized) vs. last month's 4.1% and expectations for 3.95M.

And the Kansas City Fed Manufacturing Index improved to a reading of 4 vs. last month's level of 1.

The main event today will be the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. The headline number is forecast to be up 0.3% m/m with the annual rate at 2.7% vs. 2.6% last month. The core rate (ex-food & energy) is estimated at 0.2% m/m, down a bit from last month's 0.3%, with the y/y rate at 2.9%, in line with last month's pace.

Earlier this month, the CPI (retail inflation) showed the annual core rate coming in at 3.1%, in line with last month, while the PPI (wholesale inflation) fell by nearly a full percentage point to 2.8% vs. last month's 3.7%.

We will see if the PCE comes in flattish like the CPI, or if it surprises lower like the PPI. Either way, short of a sharply higher than expected showing, the Fed looks set to lower rates again next month, and likely again in December. But the Fed insists it will remain data dependent. So, every report counts.

In addition to the PCE index, we'll also get the Consumer Sentiment report.

In other news, President Trump signed an Executive Order yesterday allowing the TikTok deal to proceed. The U.S. and China agreed to a framework deal last week. The Chinese firm ByteDance will now own roughly 20%, while a U.S. group, which includes Oracle, Private Equity firm Silver Lake, and a state-owned UAE firm MGX will make up the largest ownership stake at 45%. Existing shareholders will own the remaining 35%.

It was reported that Amazon reached a settlement agreement with the FTC for $2.5 billion. The suit was originally brought against them in 2023, and alleged they violated the Restore Online Shoppers' Confidence Act by duping customers into signing up for Prime and making it difficult to cancel. Amazon denies the allegations, but chose to settle.

With 1 more day to go, stocks are on pace to close lower for the week.

After a soaring 7-week rally which saw the S&P up 6.83%, the Nasdaq up 9.59%, and the small-cap Russell 2000 up 13.0%, a little bit of profit taking should not come as a surprise.

But Q4 is just around the corner, which is historically the best quarter of the year for stocks.

So, I'm expecting a lot more upside to come.

Best,