Stocks End Higher To Start The Week  Image: Bigstock Stocks closed higher yesterday with all of the major indexes in the green. Last week's better than expected CPI and PPI inflation reports confirmed that inflation was on the decline. Still too high. But definitely moderating with core CPI (retail inflation) at 5.5% y/y vs. last month's 5.6% and last year's peak of 6.6%, while core PPI (wholesale inflation) came in at 3.2% y/y vs. last month's 3.4% and last year's peak of 8.2%. The Fed, in their latest FOMC announcement earlier this month, hinted that they will be pausing their rate hikes now that they've hit their terminal rate forecast of 5.1%. Interestingly, while the Fed has said they are not expecting to cut rates until next year (they are forecasting a Fed Funds rate of 4.1% in 2024, and 3.1% in 2025), Fed Funds traders are betting that the Fed cuts rates sooner rather than later with the futures market expecting a 70% chance of a 25 basis point rate cut by September. With the Fed news behind us (at least until their next meeting on June 13-14), and earnings season winding down (although we'll get plenty of retail earnings this week), the debt ceiling drama will be grabbing headlines this week. Talks are scheduled to resume today. There's a rumor that progress is being made. But also that there may be a short-term extension in the works to give both parties a chance to hammer out a larger deal without the impending X-date (when the Treasury runs out of emergency funding), looming so close by (June 1). We shall see. In other news, yesterday's Empire State Manufacturing Index came in well below expectations at -31.8 vs. last month's 10.8 and views for -2.0. Today we'll get Retail Sales, Industrial Production, Business Inventories, and the Housing Market Index. And more earnings. Even though earnings season is winding down (more than 91% of S&P 500 companies have already reported), we'll get plenty of retail earnings this week with Home Deport reporting this morning, Target reporting tomorrow, and Walmart reporting on Thursday, along with Chinese powerhouse Alibaba. In the meantime, the Dow and the S&P are within striking distance of their 2023 highs, while the Nasdaq just made another new 2023 high yesterday. With inflation on the decline, interest rates appearing to be on pause, personal incomes hovering near all-time highs, and the economy, while slowing, continuing to grow, that's good news for the market. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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