Stocks End Higher Yesterday, Inflation Data And FOMC Announcement On Deck This Week  Image: Bigstock Stocks closed higher yesterday with all of the major indexes in the green. Last week we saw the Dow, S&P, and Nasdaq all make new YTD high closes. And they did that again yesterday. With inflation on the decline, a strong and resilient jobs market, and the corporate earnings outlook underscoring growth, there's plenty of excitement in the belief that we could see not just new YTD highs, but new all-time highs very soon. It's been 22 long months since the S&P made its all-time high. We are now only a little more than 4% away from eclipsing it. Wednesday's FOMC announcement could very well be the catalyst to get us over that threshold. Currently, there's a 97.1% probability that the Fed pauses yet again, making it the third pause in as many announcements. But what everybody is really interested in is what the Fed says about future interest rates (are they done with their historic rate hike cycle), and what their outlook is for rate cuts next year, and when they see it beginning. I highly doubt we will get it spelled out as plainly as we all wish it would. But they are likely to update their growth projections for 2024 and 2025, along with their inflation projections, and of course, their interest rate expectations. The Fed has previously suggested we could see a -50 basis point cut in 2024. But many analysts are factoring in -125 basis points. We will see if that outlook changes for the Fed. As for time frames, there's not a lot of conviction that well see anything before May. But you never know. So in addition to the size of the potential rate cuts, the 'when' will be a major topic of interest as well. But before that, we'll get the Consumer Price Index (CPI) inflation report this morning. This will be one of the last inflation reports we'll get before the Fed announcement on Wednesday. The headline number is expected to be flat m/m, while the y/y rate is expected to dip to 3.1% from last month's 3.2%. The core rate (ex-food & energy) is expected to be up 0.3% m/m vs. last month's 0.2%. The y/y rate is expected to remain unchanged at 4.0%, just like last month. Tomorrow we'll get the Producer Price Index (PPI) inflation report. That will be the last inflation report before the Fed announcement. Even though the Fed has likely already made up their mind on rates for Wednesday, what comes next, and what 2024 looks like, is completely up in the air. In the meantime, the Q4 rally continues. And with December typically being a strong month (and the latter part being the best), it looks like there's plenty more upside to go before we close out 2023. So make sure you're taking full advantage of it. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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