Stocks Up Again, Extending Last Week's Gains  Image: Bigstock Stocks closed solidly higher yesterday, adding to last week's sharply higher gains. Last week, several Fed officials came out and reiterated their commitment to tackling inflation, with Fed Chair, Jerome Powell, insisting that they will "keep at it until the job is done." The market cheered the news. Especially since high inflation poses a bigger risk to the economy than higher interest rates. And with many previously doubting the Fed's resolve, the market appears to finally believe it. Mr. Powell also reiterated that the Fed's goal is still to achieve a "soft landing." That too is a proposition that doesn't sound as far-fetched as it once did. The Fed meets next week on September 20-21. And the market has put the odds at 90% that they'll raise interest rates another 75 basis points. The midpoint for the Fed Funds rate is currently at 2.38%, so another 75 bps would put the midpoint at 3.13%. With two more FOMC meetings left in 2022 after this one (November and December), they are likely to keep going throughout the rest of the year. Although, nobody knows for sure what the size will be for those. The Fed has said repeatedly they will monitor the data. So every inflation report and economic report has its importance. We'll get another look at inflation with this morning's Consumer Price Index (CPI). Inflation has slowly and incrementally ticked down over the last 3 months. We'll see if it can do it again. Inflation still remains near 40-year highs. But it does appear that peak inflation may very well be behind us. Last month the CPI was flat m/m, and up 8.5% y/y vs. the previous month's 9.1%. The consensus for this morning is for inflation to be down -0.1% m/m, and to come in at 'just' 8.0% y/y. (Although, ex-Food & Energy, the estimates are for an increase of 0.3% m/m, and to come in at 6.1% y/y vs. last month's 5.9%.) That comes out at 8:30 AM ET. We'll also get the NFIB Small Business Optimism Index. Traders will see if they can build on yesterday's gains (and last week's rally), and put more distance between June's lows (when people were expecting the worst), and now. With the second half of the year expected to be much better than the first half (Q3 GDP is expected to come in at 1.3% vs. last quarter's -0.6% and Q1's -1.6%), there are plenty of reasons to believe there's more upside to go in the market. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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