Stocks closed lower yesterday to start off the shortened week.

Last week's Employment Situation Report, which came in much better than expected (up 162,000 new jobs in August vs. the consensus for ?just? 55,000), raised expectations for a rate increase, which went from 50% on Thursday before the jobs report, to 60% afterwards. But I would not attribute too much to that. The market has been speculating on a rate hike for months. And if anything, the situation has only improved to not hike rather than hike. Granted, the odds still suggest an increase is possible. But it would likely be one and done. And I don't see a 25-basis point increase, if we get it, as undoing the 3 rate cuts that preceded it last year, or derailing this historic time in the economy or the market, in my opinion.

On the flip side, the stronger-than-expected jobs report also served to reinforce the resiliency of the economy and underscore the strong earnings outlook. All bullish signs, which should not be overlooked.

In addition to the strong August labor report, revisions from previous months saw June gain an extra 11,000 jobs to 31,000 (up from 20,000), and July adding 44,000 jobs to 21,000 (up from -23,000), erasing July's surprising decline and confirming a gain after all.

The economy is doing just fine. And that's also being reflected in corporate earnings. Q2'26 earnings season, which officially wrapped up a couple of weeks ago, showed Q2 S&P earnings growth up 45.2%. Wow. And Q3 is forecast at 23.0%, with Q4 at 25.3%, and Q1'27 at 20.4%. Earnings drive stock prices. And the earnings picture is decidedly bullish.

September does have a history of being a tougher month. However, the S&P bucked that trend last year gaining 3.53%. It was also up in September 2024 by 2.02%. In 2023 it was down -4.87%. But went on to erase those temporary losses and close up 24.2% for the year. Those three years, not surprisingly, coincided with the AI boom. And I'm expecting another trend-bucking performance this year. And for the rest of the year.

But it won't be without volatility.

Increasing tensions in the Middle East continue to be a factor.

In other news, retaliatory tariffs from Canada of 15%, 25% and 50% on about $20 billion of U.S. goods took effect on 9/8. For context, it covers about 6% of U.S. exports to Canada (using last year's numbers). So, it's a relatively small percentage. But $20 billion and 700 products are large enough to notice. Canada said they would go "dollar for dollar" in response to the U.S. imposing 50% tariffs on roughly $20B of Canadian goods.

The main event report-wise this week will be Thursday's Producer Price Index (PPI ? wholesale) inflation report, and then Friday's Consumer Price Index (CPI ? retail) inflation report.

This week's inflation reports will be the last inflation reports before next week's FOMC Announcement on Wednesday, 9/16.

The last several reports have shown inflation pressures easing, albeit still too high.

But the consensus is mixed this week with PPI estimates expecting headline inflation to rise to 5.3% y/y vs. last month's 4.7%, and the core rate (ex-food & energy) up 4.6% vs. last month's 4.2%. The CPI report has headline estimates at 3.4% y/y, in line with last month, while the core rate is expecting a slight decline to 2.4% vs. last month's 2.5%.

In the meantime, stocks are still near all-time highs. And there's a whole day of trading ahead.

See you tomorrow,