Stocks closed higher yesterday after a better-than-expected inflation report.

Yesterday morning, the Consumer Price Index (CPI) showed headline inflation for November at 0.2% m/m vs. the consensus for 0.3%. The y/y rate moderated to 2.7% vs. the previous report's 3.0% and views for 3.1%. The core rate (ex-food & energy) came in at 0.2% m/m vs. estimates for 0.3%. The y/y rate eased to 2.6% vs. the previous 3.0% and expectations for the same.

A surprisingly good report. But some have questioned it, saying the report has flaws. One item cited in particular is the OER or 'owner's equivalent rent.' The Bureau of Labor Statistics (BLS ? the agency that compiles the report) used 0 (zero) for about one third of the cities used in the October inflation calculation, thus potentially lowering it artificially for November. Others point to goods prices surveyed in November as potentially being lower due to holiday sales and discounts. All valid concerns. But the number is what it is. And it does show inflation easing, or at least not rising. And that's good news on the inflation front, and for those looking for another rate cut in January.

We're expecting to get another look at inflation this morning with the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. Some sites are expecting a PCE release today. Although, other sites, including the Bureau of Economic Analysis (BEA ? the agency that compiles the report), say it won't come out until 12/23. Either way, the headline number was last up 0.3% m/m with the y/y rate up 3.0%. The core rate was last reported at 0.2% m/m with the y/y rate at 3.0%.

Whether today or next Tuesday -- will analysts find flaws in this report? Maybe. But a confirmation of yesterday's CPI report could further lift the market as it would increase the chances for a January rate cut.

The CME's FedWatch tool now places the odds for a January cut at 26.6%. Although, the odds for a March cut are still the better odds at 58.3%.

The market was also helped by Wednesday afternoon's earnings report by Micron Technology. After the close they reported a positive EPS surprise of 22.3% and a positive sales surprise of 7.25%, for a quarterly EPS growth rate of 167% vs. this time last year, and a sales growth of 56.6%. They also upped their guidance for next quarter, and investors cheered the news. They were up 10.21% yesterday.

In other news, yesterday's Weekly Jobless Claims were down -13,000 at 224,000 vs. the consensus for 225,000. The smoother 4-week moving average came in at 217.5K.

The Philadelphia Fed Manufacturing Index fell to -10.2 vs. last month's -1.7 and estimates for 2.2.

E-Commerce Retail Sales for Q3 were up 1.9% q/q vs. the previous 1.5%.

And the Leading Indicators report was down -0.3% m/m.

Aside from today's PCE report (if we get it), we'll also get Existing Home Sales and Consumer Sentiment.

It's also Quadruple Witching, which means index futures, stock futures, index options, and stock options all expire. So there could be some extra volatility.

Just 7½ more trading days left in the year.

Solid year so far, in spite of some recent backfilling. YTD, the Dow is up 12.7%; the S&P is up 15.2%; the Nasdaq is up 19.1%; and the small-cap Russell 2000 is up 12.5%.

Still expecting an end-of-year rally to lift stocks even higher.

And still expecting the S&P to finish up 20% or more for the year.

Best,