Stocks closed higher to start the week, and to finish the month.

While September is historically the worst month for stocks, it finished like a champ with all of the indexes in the green. For the month, the Dow was up 1.85%, the S&P 500 was up 2.02%, the Nasdaq was up 2.68%, the small-cap Russell 2000 was up 0.56%, and the mid-cap S&P 400 was up 0.98%.

We now enter Q4, which is historically the best quarter for stocks. In fact, since 1950, the S&P has increased by more than 4% in the last 3 months of the year. And it's been up 80% of the time.

As spectacular as this year has been so far, the market looks set to end on an even stronger note.

After last week's Personal Consumption Expenditures (PCE) index, which confirmed that inflation continues to ease, the focus shifts to this week's Employment Situation report on Friday, 10/4.

With inflation risks having receded, and labor risks having risen, the employment report has taken on greater importance. But both inflation and the labor market appear to be in a fine spot at the moment.

Those sentiments were on display yesterday when Fed Chair Jerome Powell spoke before the National Association of Business Economics, in Nashville, TN.

He went on to say, "if the economy performs as expected, that would mean two more rate cuts this year, a total of 50 basis points more."

Interestingly, stocks initially sold off on those comments, but then quickly recovered. That's because Mr. Powell's remarks were wholly consistent with what he said the previous week when the Fed cut rates, and forecast another 50 basis point cut by year's end (presumably by 25 basis points each in November and December).

Mr. Powell's outlook only differed a bit from what the market had begun to expect, which was another 50 basis point cut in November, along with an additional cut in December. But nobody should be surprised or disappointed with yesterday's comments indicating two 25 bps cuts, as they were right in line with what he publicly stated the other week. And those comments remain bullish for the market.

He went on further to say that "with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in an environment of moderate economic growth and inflation moving sustainably down to our objective." And that "we do not believe that we need to see further cooling in labor market conditions to achieve 2 percent inflation."

Personally, I believe that was the most bullish part of all his comments, as it implies they will act to mitigate any larger than expected weakness in the labor market. Short of that, they will methodically lower rates, "the economy evolves broadly as expected," and that "policy will move over time toward a more neutral stance," which they pegged at 3.4% by sometime next year.

In other news, yesterday's Chicago PMI came in at 46.6 vs. last month's 46.1 and views for 46.0.

And the Dallas Fed Manufacturing Survey put the General Activity Index at -9.0 vs. last month's -9.7 and estimates for -10.0. The Production Index fell to -3.2 vs. last month's 1.6.

Today we'll get the PMI Manufacturing Final report, the ISM Manufacturing Index, Construction Spending, and the Job Openings and Labor Turnover Survey report (or JOLTS for short).

Q4 begins today. And there's plenty of excitement for what the best quarter of the year could bring.

See you tomorrow,