Stocks Down Last Week, Earnings Season Ramps Up This Week  Image: Bigstock Stocks closed lower on Thursday and for the shortened trading week, making it two weeks in a row for the S&P and Nasdaq, and three weeks in a row for the Dow. Last week's higher than expected CPI and PPI reports underscored the need to get inflation under control. The Fed looks to do that at their next meeting on May 3-4, when they're expected to raise rates by 50 basis points, and begin paring down their record high $9 trillion balance sheet (ultimately getting to a point where they can unwind as much as -$95 billion per month). But even without that, some are speculating that the recent inflation readings may prove to be the high-water mark for inflation. And with higher prices already curbing some demand for goods, services, and financing, we should begin to see inflation plateau or tick down in the upcoming numbers. It will take some time to get back to the desired 2% level that the Fed would like to see. But ceasing to climb any higher would be a great start. And even though moves to curb inflation means slowing the economy down a bit, the Fed believes the economy will "flourish in the face of less accommodative monetary policy." And why wouldn't it? Even with rates getting to 1.9% by year's end (which is the Fed's forecast), that would still put rates at historically low levels. But by wringing some of the excesses out of the economy, it would take it from an overheated pace, to a more sustainable one that could elongate the economic expansion we're in. In the meantime, even though earnings season has 'unofficially' already begun, it 'officially' kicks off this week on Wednesday, 4/20, when Alcoa reports after the close. We'll get a total of 298 companies reporting this week. Another 969 next week. And then things really kick into gear. Even though last week's price action was disappointing, the profit taking was healthy. And squaring positions ahead of a 3-day weekend with a war going on makes sense. But with earnings season upon us (stocks typically go up during earnings season), stocks are in a good position to start heading back up again. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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