Stocks Closed Mostly Lower Yesterday, All Eyes On This Morning's PCE Inflation Report Stocks closed mostly lower yesterday with only the Dow eking out a small gain. Most of the indexes were up during the day, but they could not hold on and faded by the close. Wednesday's rout came after the Fed cut rates by 25 basis points as expected, but surprised by lowering their rate cut expectations to 2 cuts in 2025 rather than their previously forecasted 4 cuts. There were plenty of grumblings from market watchers prior to that about possibly seeing fewer cuts next year, given that the last few inflation reports showed progress on inflation stalling. But the Fed making it official was a bit of a surprise. But as I wrote yesterday, I suspect the extreme selloff had more to do with profit taking following the spectacular rally over the last few weeks with many believing it ran too far too fast. Sure, the surprise caught many investors flat-footed. But rates are still headed lower. And the economy is doing well. In fact, Fed Chair Jerome Powell said "the U.S. economy has just been remarkable," and that he feels "very good about where the economy is." Hardly an excuse to selloff. Simply put, bull markets regularly pull back. And that is likely what we saw/we're seeing now. But the economic outlook is decidedly positive. And thats the takeaway. In fact, the third and final estimate for Q3'24 GDP yesterday came in at 3.1% vs. last month's estimate of 2.8% and views for the same. We'll get another look at inflation this morning with the Personal Consumption Expenditures (PCE) index, which is the Fed's preferred inflation gauge. Headline numbers are expected to be up 0.2% m/m vs. last month's 0.2% pace, while the y/y rate is expected to be up 2.5% vs. last month's 2.3%. The core rate (ex-food & energy) is expected to come in at 0.2% vs. last month's 0.3%. The y/y rate is expected to come in at 2.9% vs. last month's 2.8%. We'll also get Consumer Sentiment, and the Baker Hughes Rig Count report. It's also Quadruple Witching, which means index futures, stock futures, index options, and stock options all expire. So there could be some extra volatility today. In other news, the House wrote up a new short-term spending bill (continuing resolution or CR), after many complained of the first one the day before. But it needs to be voted on and passed. And the Senate has to do the same. And it all has to be done by tonight (Friday at midnight), or else the government technically shuts down. Congress being Congress, it's likely to go to the very last minute. Or maybe go over by a bit. But hopefully, they get this done. But we'll all have to wait and see. In the meantime, in spite of Wednesday's volatile session, let's not overlook what a spectacular year it's been so far. YTD, the Dow is up 12.3%; the S&P 500 is up 23.0%; the Nasdaq is up 29.1%; the small-cap Russell 2000 is up 9.59%; and the mid-cap S&P 400 is up 11.7%. And with a week and a few days left in the year, I would not be surprised to see it finish on an even stronger note. Best,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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