Stocks closed sharply higher yesterday with the Nasdaq gaining 2.20%, followed by the small-cap Russell 2000 with 1.94%, and the S&P 500 with 1.41%.

Last week's pullback, which was likely driven by profit taking as many investors waited until the new year to pull profits so they could push their tax obligation into 2025 rather than 2024, might be coming to an end.

And last Friday's better than expected Employment report appeared to be helping.

While it came in better than expected at 216,000 new jobs in December vs. the consensus for 164,000 (which gave pause to some that the labor market's resilience could prompt the Fed to keep rates higher for longer), the downward revisions to previous months showed that employment is solid, but not problematically so where higher rates will be needed to cool it down.

But with the jobs report behind us, the focus will shift back to inflation. On Thursday, we'll get the Consumer Price Index (CPI) retail inflation report, followed by Friday's Producer Price Index (PPI) wholesale inflation report.

Both are expected to continue their downward trend of lower inflation readings. But any divergence from this trend (be it a slowing of the downtrend or possibly a tick up), could signal to the Fed that their first rate cut might need to come later (May) rather than sooner (March).

After this week's CPI and PPI reports, we'll get the Personal Consumption Expenditures (PCE) report (which is the Fed's preferred inflation gauge), a few weeks later on January 26.

And then the following week we'll get this year's first FOMC announcement on Wednesday, January 31. That's still 3½ weeks away. But that's what's on the horizon.

In the meantime, we've got plenty of other reports to get through. Today we'll get the NFIB Small Business Optimism Index, and the International Trade in Goods and Services report.

Yesterday's gains nearly erased last week's weakness.

Still more to go. But it was a big step in the right direction.

And we'll see if we can get some follow though today/this week.

See you tomorrow,