Stocks Closed Mostly Higher Yesterday, Fed Chair Testimony Today, Inflation Reports On Tap For Later In Week Stocks closed mostly higher yesterday with all of the major indexes in the green, except for the Dow which missed out by just -0.08%. Last week's Employment Situation report, which showed more job gains, but less than previous reports, and sent both the S&P and Nasdaq to yet another new all-time high, provided support again in yesterday's trade. But the market will turn its attention back to inflation this week. Today, Fed Chair Jerome Powell will give his Semiannual Monetary Policy testimony to the U.S. Senate Committee on Banking, Housing, and Urban Affairs. That begins at 10:00 AM ET. And then tomorrow (Wednesday, 7/10), he'll do it again to the U.S. House Financial Services Committee. While this is bound to make news, the markets are really waiting for Thursday's Consumer Price Index (CPI) inflation report, and then Friday's Producer Price Index (PPI) inflation report. Last month's core (ex-food & energy) CPI (retail inflation) came in at 3.4% y/y vs. the previous month's 3.6%. And core PPI (wholesale inflation) came in at 2.3% vs. the previous month's 2.5%. Those reports, as well as last month's PCE report (the Fed's preferred inflation gauge), confirmed that we were back on the disinflationary path. But the Fed has insisted they need to see more evidence that we are indeed on a sustainable trajectory back to their target of 2%. Once they reach that level of confidence, they'll be ready to pull the trigger and cut rates. At the moment, the Fed is expecting to reach that level of confidence by year's end, hence their forecast for 1 rate cut this year. But each inflation report matters. And all eyes will be on both of those reports later this week. In the meantime, in addition to Mr. Powell's testimony before the Senate today, we'll also get the NFIB Small Business Optimism Index. We'll also hear from the Fed's Michael Barr, Vice Chair for Supervision of the Board of Governors, and Michelle Bowman, member of the Board of Governors. This week also marks the unofficial start to earnings season when big banks JPMorgan Chase, Wells Fargo, and Citigroup report on Friday. Next week is the official start when Alcoa reports next Wednesday after the close. Earnings season is always an exciting time since stocks typically go up during earnings season. And I expect that to happen again this earnings season. Especially with earnings and sales estimates on the rise. Last quarter's earnings season (Q1'24) showed S&P earnings up 7.0% and sales up 4.4%. This earnings season (Q2'24) is expected to show earnings up 8.6% and sales up 4.7%.
Moreover, Q3'24 is expected to show earnings up 6.9% and sales up 4.9%. And Q4'24 is expected to show earnings up 12.7% and sales up 5.6%. So, there's plenty of reason to expect the gains to continue. See you tomorrow,  Kevin Matras
Executive Vice President, Zacks Investment Research | 
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