Stocks closed lower yesterday, following two up weeks in a row.

Of course, not every day can be up day. Regardless, the major indexes are trading within striking distance of their all-time highs.

Last week's benign inflation report, and weaker-than-expected private payrolls, support the Fed cutting interest rates for the third time this year, when they meet on Wednesday, 12/10.

While a rate cut is largely expected this week (the CME's FedWatch tool places the likelihood at 89.4% for a 25 basis point cut), what traders will be listening closely for is the Fed's outlook on rate cuts for next year.

In the meantime, not much in the way of economic reports out yesterday.

But today we'll get the NFIB Small Business Optimism Index, the Productivity and Costs report, and the Job Openings and Labor Turnover Survey report (or JOLTS for short).

After the close yesterday, we heard that the U.S. Government will allow NVIDIA to sell their H200 AI chips to "approved customers" in China, and other countries, which were off limits prior.

President Trump said that Chinese President Xi Jinping "responded positively" to the proposal. In a post, the President said that "25% will be paid to the United States of America." He went on to say that this will "support American jobs, strengthen U.S. Manufacturing, and benefit American taxpayers." He also mentioned it in the context of protecting National Security.

The President also said yesterday that he would sign an Executive Order creating Federal policy for AI. The "one rule" is meant to supersede a patchwork of pending state regulations with a national standard. The EO is almost certain to be challenged in court. But that's the current landscape regarding regulation of the fast-moving AI industry.

Separately, President Trump announced $12 billion in aid to U.S. farmers that have been impacted by tariffs. Soybean farmers are one of the bigger beneficiaries of the package. China usually buys 29 million metric tons of soybeans. But after the tariff dispute, imports dropped dramatically. The U.S. and China, earlier this year, struck a deal where China would buy 12 million metric tons this year, and 25 million metric tons for each of the next 3 years. The aid will help offset the reduced purchases from this year, and help finance operations.

In other news, Jamie Dimon, earlier in the day, said JPMorgan Chase would be launching a $1.5 trillion security initiative aimed at boosting America's critical industries and supply chains. Sectors likely to benefit include energy, defense, technology and finance, amongst others.

Three and a half more weeks to go for 2025.

If all goes well, we could see the S&P close up by 20% or more for the third year in a row.

In 2023 it was up 24.2%, and in 2024 it was up 23.3%. YTD, it's up 16.4%. So we only need another 3.60% to hit that mark.

The last time we saw three years in a row of 20%+ gains was back in 1995-1997. But it ultimately went on to be up 5 years in a row of $20%+ gains. Back then it was driven by the dot-com tech boom.

This time, the tech-boom is being driven by AI. And, it's looking like it could be even bigger and more transformative than the internet was.

With Q4 being the best quarter for stocks, and December having a 77.8% likelihood of being up, the odds are looking good an end-of-year rally, and another stellar year of gains.

See you tomorrow,