Stocks closed sharply higher yesterday, led by the Nasdaq's 2.43% and the S&P's 1.68%.

Yesterday's better than expected Producer Price Index (PPI) wholesale inflation report sent stocks soaring, as it added one "more good" data point to give the Fed the confidence it needs to cut rates.

The headline inflation number was up 0.1% m/m vs. last month's 0.2% and views for 0.2%. The y/y rate increased by 2.2% vs. last month's 2.7% and estimates for 2.6%. The core rate (ex-food & energy), was flat (0.0%) m/m vs. last month's 0.3% and estimates for 0.2%. The y/y rate was up 2.4% vs. last month's 3.0% and the consensus for 3.0%.

This was a very good report, and came in much better than expected. And it further raised expectations that the Fed will move to cut rates in September.

We'll get another look at inflation today with the Consumer Price Index (CPI) retail inflation report. The headline rate is expected to be up 0.2% m/m vs. last month's -0.1%, with the y/y rate up 3.0%, in line with last month's pace. The core rate is expected to be up 0.2% m/m vs. last month's 0.1%, with the y/y rate up 3.2% vs. last month's 3.3%.

Another good report could see the rally extend even further.

In other news yesterday, Atlanta Federal Reserve President, Raphael Bostic, said that recent economic data made him "more confident" that inflation is on it's way back to 2%. But he said he still wants to see "a little more data" before pulling the trigger on cutting rates.

While he didn't say exactly how many more data points he needs to see, or what his time frame is to begin cutting, he still believes rates will be lower by year's end. And added, "I am willing to wait, but it's coming ... it's coming."

In addition to this morning's CPI report, we'll also get MBA Mortgage Applications.

And more earnings with another 199 companies on deck to report including Cisco, UBS and Cardinal Health.

It's still early in the week, but the indexes are off to a great start and are up nicely for the week so far.

If we continue to get friendly inflation and economic data, that could help put the recent pullback/correction in the rearview mirror.

See you tomorrow,