Stocks closed lower yesterday following the CPI inflation report.

Yesterday morning's Consumer Price Index (CPI – retail) showed headline inflation up 0.2% m/m vs. last month's 0.2% and views for 0.1%. On a y/y basis it was up 2.4%, which was a bit under last month's 2.5%, but a bit over the consensus for 2.3%. The core rate (ex-food & energy) was up 0.3% m/m vs. last month's 0.3% pace and estimates for 0.2%. The y/y rate ticked up to 3.3% vs. last month's 3.2% and views for the same.

Give or take a tenth of a percent, the report came in largely as expected. But there was a bit of disappointment that there wasn't more progress. Nonetheless, in spite of the market finishing lower yesterday, the losses were relatively modest, and they all finished well off their lows of the day.

I have noticed yields rising lately as well, which is baffling. But I'm chalking that up to short-term noise. Because the Fed is still expecting to cut rates by another 50 basis points by year's end. And then another 100 bps in 2025 (likely in the first half, based on how past rate-cutting cycles have played out).

We'll get another look at inflation this morning with the Producer Price Index (PPI – wholesale) report. The headline number is expected to be up 0.2% m/m, just like last month. The y/y rate is expected to come in at 1.6% vs. last month's 1.7%. The core rate is expected to come in at 0.2% m/m vs. last month's 0.3% pace. The y/y rate, however, is expected to be up 2.7% vs. last month's 2.4%. I would expect the PPI to come in much like the CPI did, give or take a tenth of a percent in either direction as well.

In other news, Weekly Jobless Claims yesterday rose by 33,000 to 258,000, well above the consensus for a 1K rise to 226K. Although, some of that was likely due to Hurricane Helene and the Boeing strike. The smoother 4-week moving average came in at 231K. (I would expect weekly claims to be elevated in the coming weeks with Hurricane Milton as well.)

Federal Reserve Bank of Richmond President, Thomas Barkin, yesterday said that "we're definitely headed in the right direction," in regard to the progress on inflation. While he acknowledged the fight was not over, he said he was encouraged by some of what he saw in the latest report.

We'll hear from Chicago Fed President Austan Goolsbee today, along with Fed policymakers Lorie Logan and Michelle Bowman as they speak at their respective engagements throughout the day.

We'll also get the Consumer Sentiment report and the Baker Hughes Rig Count report.

But the PPI inflation report will be the main event.

Once that's out of the way, the market will pivot to earnings season, which unofficially kicks off today with earnings from big banks JPMorgan Chase, Wells Fargo, and BlackRock to name a few.

With one more trading day to go, the big three indexes (Dow, S&P 500 and Nasdaq) are all up for the week. The mid-cap S&P 400 is not that far behind. The small-cap Russell 2000 has a bigger stretch to make up. But a good inflation report today could boost those laggards into the green for the week as well.

Regardless of the other two, if the big three indexes can close positive for the week again this week, that'll make it 5 up weeks on a row!

Best,