Stocks closed moderately lower yesterday, giving back only a small portion of Monday's sharp gains.

Yesterday's slightly hotter-than-expected Consumer Price Index (CPI ? retail) inflation report did weigh a bit. The headline rate rose 0.4% m/m vs. last month's 0.6% pace and views for 0.3%. The core rate (ex-food & energy) was up 0.3% m/m, in line with last month's 0.3%, but above estimates for 0.2%.

Shelter costs rose +0.3%, accounting for more than 30% of the overall monthly increase. Food prices increased +0.5%, while energy prices rose +0.7%.

The report did not include the usual year-over-year inflation figures for most categories because last year's government shutdown prevented the collection of October 2025 data.

While headline inflation moderated from September, both the headline and core readings did exceed expectations. That pushed Treasury yields higher (the 10-year Treasury yield was up 11.90 bps at 4.983%), and reinforced expectations for additional Fed tightening at the next FOMC announcement on 12/9.

Fed Governor Christopher Waller also left open the possibility of a larger-than-usual rate increase next month, opening the door for a 50 basis point increase.

At the moment, the expectation is for a 25 bps increase. And the CME's FedWatch tool puts the odds of quarter point hike at 88.5%. The odds for a half point are only at 11.5%.

In other news, yesterday's NFIB Small Business Optimism Index came in at 97.8 vs. last month's 97.9 and consensus for 97.7.

Today is Veteran's Day, so no economic reports out today. Although, the market remains open.

Tomorrow, the economic reports resume with MBA Mortgage Applications, Weekly Jobless Claims, and Existing Home Sales.

And, of course, more earnings.

Today we'll hear from as many as 260 companies on deck to report.

And tomorrow we'll hear from another 503 companies, including widely held Cisco and Applied Materials when they report after the close. Their results and outlooks will provide updates on demand for networking equipment, semiconductor manufacturing equipment, and the broader AI infrastructure buildout.

In the meantime, let me end with a reminder that the bullish seasonal tendencies and bullish cyclical tendencies all bode well for the market.

Seasonally, the fourth quarter is historically the best quarter of the year for stocks. Since 1950, the S&P has gone up 79% of the time, with an average gain of 4.1%. Yes, Q4 is off to a rough start. But nobody said it was without volatility.

And cyclically, regardless of politics, stocks typically rally after midterms. Since 1950, between election day and the end of the year, it's higher 68% of the time. And looking out over a 12-month period from midterms, the odds improve even more dramatically with the S&P up every time with an average gain of more than 15%.

So I'm expecting a strong end-of-year rally, and another double-digit gain next year.

See you tomorrow,