Stocks closed higher on Friday, and for the week. That includes small-caps, which have been neglected for much of the year. In fact, the small-cap Russell 2000 led the indexes with an outsized gain of 6.00% for the week. That was followed by the mid-cap S&P 400 with a gain of 4.31% and the Dow with a gain of 1.59%.

Last week's Semiannual Monetary Policy testimony to Congress, where Fed Chair Jerome Powell said the economy has made "considerable progress" on inflation, while maintaining a "strong, but not overheated" job market, set the stage for a late-week rally.

Thursday's better-than-expected CPI inflation report, which suggested the Fed might be able to cut rates sooner rather than later (and possibly twice this year vs. their forecasted one cut), produced an interesting reaction. Small-caps and mid-caps soared on the news, while the S&P and Nasdaq dropped, which reignited rotation chatter.

Friday's PPI report, unlike the CPI, showed inflation coming in a bit hotter than expected. But all of the indexes soared anyway.

Aside from when will the Fed actually begin cutting rates, and by how much this year, the other question is, are we looking at the long-awaited rotation, or breadth expansion, or maybe both?

Either way, it appears bullish for the market. Especially after a record number of stocks beat the market on Thursday, following a record number that underperformed in the first 6-months of the year.

Rotation out of large-caps and big-tech/AI related names, doesn't mean that trade is over. It could very well mean that instead of that trade dominating the market, there might now be room for other market-caps, and industries to participate. So instead of this historic bull market being led by just a handful of stocks, far more might now be joining the party. And breadth expansion could usher in a whole new leg higher for the market.

Earnings season unofficially kicked off last week after several of the big banks (JPMorgan Chase, Citigroup and Wells Fargo) reported both positive sales and earnings surprises.

Earnings season officially kicks off this week when Alcoa reports earnings on Wednesday, 7/17, after the close.

But the entire week is full of marquee names on deck with Goldman Sachs and BlackRock reporting today; Bank of America, Morgan Stanley and United Health Group posting tomorrow; Johnson & Johnson, United Airlines and Las Vegas Sands going on Wednesday; Netflix, Intuitive Surgical, Abbott Labs and Domino's Pizza reporting on Thursday; and American Express and Schlumberger posting on Friday.

Should be a busy week of earnings.

It will also be a busy week of economic reports with the NY Fed Manufacturing Index coming out today; Import & Export Prices, Business Inventories and Retail Sales coming out tomorrow; Housing Starts & Permits and Industrial Production on Wednesday; and the Philadelphia Fed Manufacturing Index and Weekly Jobless Claims on Thursday.

All eyes will be on the small-caps this week to see if last week's upside breakout sticks, and if they will finally begin catching up to the rest of the indexes.

Additionally, we'll see if the S&P and Nasdaq, which have been the far and away leaders of this bull market, can keep their momentum going as well.

With earnings season underway (stocks typically go up during earnings season), there's plenty of reason to believe there's more upside to go.

So make sure you're taking full advantage of it.

See you tomorrow,