Stocks closed lower yesterday across the board.

Rising yields, once again, weighed on stocks. The 10-year Treasury yield rose to 5.11% yesterday ? the highest since 2007, and putting in one of its biggest one-day moves in about a year and a half.

Interestingly enough, it was yesterday's better-than-expected PMI Composite report, which may have sent yields higher. The Composite report came in at 58.4 vs. last month's 56.0 and views for the same. The Manufacturing Index hit 57.0 vs. last month's 53.2 and estimates for 53.9, while the Services Index hit 58.7 vs. last month's 56.8 and forecast for 56.5. These were some of the highest levels in 4 years.

But that has led some to wonder what that will mean for future inflation and further interest rate hikes.

The Fed, however, has done a pretty good job of broadcasting their expectations. And the Fed's recent Summary of Economic Projections (SEP) clearly suggests one more rate hike by year's end, putting the Fed Funds rate at 4.1%, which represents one more 25 basis point rate hike. But the SEP also sees rates staying at 4.1% in 2027 as well. So one more hike is already assumed by the market.

The CME's FedWatch tool also finally caught up, with the likelihood of another hike at their next Announcement on 10/28, going from 55% to nearly 70% yesterday.

The strength in the economy shows the Fed is not needed at the moment to shore up an anemic economy. In fact, with new orders and hiring strengthening, and the PMI report portending annualized growth of about 5% for the month, and roughly 4% for the quarter, the economy is firing on all cylinders.

The Atlanta Fed's GDPNow report is forecasting Q3'26 GDP at 5.1%, making it the fastest pace since Q4'21.

Good news was interpreted bearishly for the market yesterday. But the fact of the matter is, good news is good news in the long run. And the strength in the economy is what's fueling the 20%+ EPS growth we've been seeing.

And with the next earnings season just a couple of weeks away (stocks usually go up during earnings season), I'm expecting a lot more upside to go.

In other news, today we'll get Weekly Jobless Claims, New Home Sales, and the Kansas City Fed Manufacturing Index.

The market will be listening for any new news out of the Middle East.

Same goes for any announcements that may or may not come as a result of President Trump and Present Xi's meeting at the White House. Today is day two of a 3-day visit.

In the meantime, we'll see if the market can regroup and try and build on gains from earlier in the week when the Nasdaq made new all-time highs, and the S&P nearly did the same.

See you tomorrow,