Stocks closed higher yesterday, led by the Nasdaq's 1.45% gain.

While the same concerns on Monday were still present yesterday (worries over Israel's response to Iran following their missile attack last week, and hurricane Milton barreling towards Florida), the market was back to focusing on the economy. And the economic picture is one of growth and resilience.

That was on display last week when final Q2 GDP came in at 3%. And Q3 GDP is estimated at 3.2%, according the Federal Reserve Bank of Atlanta's GDPNOW forecast.

Same with last week's employment situation report which came in at a better-than-expected 254,000 new jobs for September, well above the consensus for 132,500, and the average monthly gain of 203,000 over the prior 12 months.

And that can also be seen in the upward trend of improvement in earnings estimates. Q3'24 earnings are expected to be up 3.7%, and sales up 5.1%. Q4'24 earnings are expected to be up 10.2%, and sales up 5.8%. Q1'25 is expected to show earnings up 12.8%, and sales up 5.7%. And Q2'25 is expected to show earnings up 14.0%, and sales up 5.5%.

When the focus shifts to the economy and earnings, it's a compelling bullish story. And why stocks keep heading higher.

Stocks are also moving higher given the start of a new earnings season. Not surprising since stocks typically move up during earnings season.

Although, the focus will shift to inflation later in the week when we get the Consumer Price Index (CPI – retail inflation) on Thursday, 10/10; and the Producer Price Index (PPI – wholesale inflation) on Friday, 10/11.

Even though the Fed has acknowledged that inflation risks have receded, some still see it as a concern.

Nonetheless, Fed Funds traders are pricing in an 86.7% probability that the Fed cuts again on November 7^thby 25 basis points. And then again by another 25 bps on December 18^th. (That also aligns with what the Fed has forecast as well.)

But the Fed insists they will remain data dependent. So all eyes will be on those inflation reports.

In the meantime, today we'll get MBA Mortgage Applications, Wholesale Inventories, and the FOMC Minutes from the Fed's last meeting.

We'll also hear from Fed policymakers Raphael Bostic, Lorie Logan, Austan Goolsbee, Thomas Barkin, Philip Jefferson, Susan Collins and Mary Daly as they speak at their respective engagements throughout the day.

With 2 days down and 3 more to go, the S&P and Nasdaq are both up for the week. If they were to do it again, that'd make it 5 up weeks in a row.

We still have a lot more week left. But the momentum appears to be back on the upside. And it won't take much to get the Dow, the small-cap Russell 2000 and the mid-cap S&P 400 to join the fun and close up for the week as well.

See you tomorrow,