Stocks Finished Higher Last Week After Moderating Inflation Reports  Image: Bigstock Stocks closed mixed on Friday, but all of the indexes finished higher for the week. That makes it 10 up weeks out of the last 11 for the Dow, S&P and Nasdaq. Friday's Producer Price Index (PPI) wholesale inflation report came in better than expected with the headline number down -0.1% m/m vs. views for 0.2%. On a y/y basis, it ticked up to 1.0% vs. last month's 0.8%, but beat the consensus for 1.3%. The core rate (ex-food & energy), was flat at 0.0% m/m vs. estimates for 0.2%, while the y/y rate declined to 1.8% vs. last month's 2.0% and views for the same. Between Friday's PPI, and Thursday's Consumer Price Index (CPI) retail inflation report, it shows that inflation continues to moderate. And that underscores the outlook that the Fed can cut rates this year (maybe even sooner rather than later). There's still one more inflation report to go on January 26, before the next FOMC announcement. That's the Personal Consumption Expenditures (PCE) report (which is the Fed's preferred inflation gauge). That's 2 weeks away. But with both the CPI and PPI reports easing, it's likely we'll see more of the same with the PCE. The FOMC announcement comes out one week later on January 31. Nobody is expecting them to cut rates then. But everyone will be listening for clues as to when they expect to start cutting. The market is expecting the first cuts to happen in March. Although, the Fed's recent language has suggested it would be later in May. But the Fed has altered their forecast numerous times on a whole host of things. And they could very well do the same again. There are exactly 12 more trading days left in the month. There's a saying that says 'as January goes, so goes the year.' With the month essentially half over, the big three indexes are virtually flat (the Dow and Nasdaq are marginally lower, while the S&P is marginally higher). But there's plenty of reason to be optimistic for the month and the year. For one, earnings season (which unofficially has already begun), officially kicks off this week. And since stocks typically go up during earnings season, that bodes well for the market. And two, let's not forget the favorable stats of the 4-year Presidential cycle which shows that year 4 (that's 2024), is the second-best year of all four years (second only to year 3 (that was 2023), which is the best year of all four years). So there's that. Moreover, the earnings estimates for the S&P 500 are pointing to a trend of improvement with Q1'24 expected to show earnings up 5% and sales up 3.6%; Q2'24 expected to show earnings up 10.4% and sales up 4.8%; and Q3'24 expected to show earnings up 7.8% and sales up 5.1%. Add in that inflation is on the decline, and rates are expected to do the same, and it looks like this year should be another solid year for the market. 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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