Stocks closed sharply higher yesterday, led by the tech-heavy Nasdaq and S&P 500 with 1.69% and 1.14% respectively.

I must say, I'm not surprised. After Wednesday afternoon's quarter point rate hike (first one in 3 years), the post-announcement price action seemed overdone. (Misplaced is probably a better word.)

As I shared yesterday, the odds favored a rally. Going back to 1994 (modern rate-hike era), when the S&P 500 falls on an FOMC Announcement day, it has historically risen the next day roughly 55-60% of the time. The average move is 0.20% to 0.35%.

Rise it did. And a lot more than 0.35%.

And I think there's a good chance Wednesday's Fed move could soon lead to a new leg higher for the market. For one, it was widely expected. Much of the recent selling was likely done in anticipation of the hike. Two, I believe it should be viewed positively because it underscores the Fed's independence and proves their commitment to fighting inflation. And three, yields have been climbing higher on their own without the Fed. And the hike better aligns with the market.

But I also think Wednesday's Announcement painted a bullish picture for the economy.

The Fed Funds rate is now at a range of 3.75-4.00% (midpoint 3.88%). But the Summary of Economic Projections (SEP) showed the majority of participants expecting just one more rate hike by year's end with the SEP only getting as high as 4.1% in 2026 and the same for 2027, and begins falling, with the longer run rate at 3.2%. Not as hawkish as some had feared. And the SEP shows PCE inflation (headline) at 3.7% this year, but falling to 2.3% in 2027. That's vs. previous expectations for 3.6% and 2.3%, which is not much of a change. Core PCE is forecast at 3.4% this year and 2.5% next year vs. 3.3% previously and 2.5%. Again, not much of a change. And it suggests rates could very well start falling sooner rather than later. Especially given that Fed Chair Kevin Warsh attributes a portion of the rise in inflation to higher oil prices rather than a broad-based acceleration. (And the Middle East tensions won't last forever.)

Additionally, the SEP also showed the Fed raising their GDP outlook for 2026 to 2.3% (up from June's projection of 2.2%), with 2027 at 2.4%, up from June's 2.3% estimate. (Mr. Warsh noted that "the economy's output is solid," and that "capital expenditures and productivity are strong.") The unemployment rate is pegged at 4.1% for this year and next (where it is now). That's down from June's forecast of 4.3% for both years. (Mr. Warsh also said that "current unemployment rates are consistent with full employment," and that "labor markets are solid and steady.")

In other news, yesterday's Weekly Jobless Claims fell -10,000 to 196,000 vs. the consensus for 208,000. Those are historically low levels. And yet another sign of a growing economy.

Today we'll get Industrial Production, Leading Indicators, and the Baker Hughes Rig Count Report. 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.

With one more day to go, the Nasdaq is currently in the green for the week. And the S&P is not that far behind. A little bit of follow-through could see them both up for the week. And a little more could see the other major indexes join them.

Best,