Stocks Closed Mostly Higher After Yesterday's PPI Report, CPI Inflation Report On Deck For This Morning Stocks closed mostly higher yesterday with only the Nasdaq, once again, eking out a modest loss. The mid-cap S&P 400 and small-cap Russell 2000 led the way with gains of 1.18% and 1.13% respectively. Yesterday's somewhat better-than-expected Producer Price Index (PPI) wholesale inflation report came as a relief and helped lift stocks. The headline number came in at 0.2% m/m vs. last month's 0.4% and views for 0.3%. The y/y rate, however, was up 3.3%, above last month's 3.0%, but in line with expectations. The core rate (ex-food & energy) was flat (0%) on a m/m basis vs. last month's 0.2% and estimates for the same. Although, the y/y rate came in at 3.5% vs. last month's 3.4% and the consensus for 3.4% as well. Today we'll get a look at the Consumer Price Index (CPI) retail inflation report. The headline number is expected to come in at 0.3% m/m, just like last month, while the y/y rate is expected to tick up to 2.9% vs. last month's 2.7%. The core rate is expected to come in at 0.2% m/m, just under last month's 0.3% pace, while the y/y rate is expected to match last month's 3.3%. As I mentioned yesterday, while the likelihood of the Fed NOT cutting rates this month (January 29) is almost a forgone conclusion at 97.3% odds, what happens at their subsequent meeting on March 31 (they don't meet in February) is still up in the air. But as I also mentioned yesterday, the overemphasis on rate cuts, I believe, is getting misplaced. The economy is clearly doing just fine with rates at the current levels. Let's also not forget that the Fed already cut rates by 100 basis points last year. And they fully anticipate to cut by another 50 basis points this year. Additionally, inflation has fallen considerably over the last couple of years. And even though progress has stalled recently, it's clearly not hampering economic growth. In other news, yesterday's NFIB Small Business Optimism Index increased to 105.1 vs. last month's 101.7 and the consensus for 101.3. In addition to this morning's CPI report, we'll get MBA Mortgage Applications, the Empire State Manufacturing Index, and the Beige Book report. Earnings season begins heating up this week, even though it doesn't officially begin until next Wednesday, 1/22, when Alcoa reports after the close. Several big banks are on deck today including BlackRock, Wells Fargo, JPMorgan Chase and Citigroup. Couple of other news items worth mentioning yesterday: China reported better-than-expected import and export data. Granted, some of that was frontloaded shipments due to worries over the incoming administration's expected tariffs. Nonetheless, it was nice to see, given the slowdown that China has experienced, and that they are trying to 'stimulus' their way out. In the U.S., Meta announced 5% cuts in its workforce in 2025. This comes on the heels of Microsoft, just last week, announcing they will be laying off some staff as well. They both mentioned focusing on lower performing employees. But cuts are cuts. These tech titans are also spending massively on AI. And it looks like they are trying to cut other expenses where they can.
Stocks are currently up for the week, sans the Nasdaq. But they are not far behind. And we'll see if the indexes, especially the small-caps and mid-caps, can extend their gains today, and into the rest of the week. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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