Stocks Soar On Better Than Expected CPI Report, PPI Report On Deck For Today

Market Moves You Need to See Stocks Soar On Better Than Expected CPI Report, PPI Report On Deck For Today [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks Soar On Better Than Expected CPI Report, PPI Report On Deck For Today [Stocks Soar On Better Than Expected CPI Report, PPI Report On Deck For Today]Image: Shutterstock Stocks closed sharply higher yesterday. Of the big three indexes, the Nasdaq led the way with 2.37%, followed by the S&P with 1.91%, and then the Dow with 1.43%. But the biggest gainers were the small-cap Russell 2000 with 5.44%, and the mid-cap S&P 400 with 3.86%. Stocks were already higher in pre-market trading, but only modestly. But once the better than expected Consumer Price Index (CPI) inflation report came out, stocks shot up. Yesterday morning's CPI report showed headline inflation flat for the month at 0.0% vs. last month's 0.4% pace and views for 0.1%. On a y/y basis it was up 3.2% vs. last month's 3.7% and the consensus for 3.3%. The core rate (ex-food & energy) was up 0.2% m/m vs. last month's 0.3% and estimates for 0.3%. On a y/y basis it was up 4.0% vs. last month's 4.1% and views for the same. After that report hit the wires, stocks blasted higher. In addition, early reports that the Senate was ready to support the House's continuing resolution to avert a government shutdown was cheered as well, thus taking away another threat that could have potentially derailed the market. (After the close, the House passed the bill, and it next heads to the Senate.) When stocks finally opened in the regular session all of the indexes gapped higher. And then continued to surge even more. Earnings beats from Home Depot before the open (even though they expressed a cautious outlook), Tencent Music, and Vipshop only added to the bullish tone. Today, we'll hear from more retailers including TJX, Target, and JD.com to name a few. Today we'll get MBA Mortgage Applications, Retail Sales, Business Inventories, the Empire State Manufacturing Index, and the Atlanta Fed Business Inflation Expectations report. But the main event will be the Produce Price Index (PPI) inflation report. The headline number is expected to show an increase of 0.1% m/m, and 2.0% y/y vs. last month's 2.2%. The core rate is expected to be up 0.3% m/m, while the y/y rate is expected to come in at 2.7%, in line with last month’s 2.7%. That report comes out at 8:30 AM ET. Each report that shows inflation continuing to tick lower is another data point that shows the Fed may not have to raise rates any further. While nobody is calling for the Fed to lower rates this year, the Fed itself is suggesting they could lower rates by -50 basis points next year, bringing the Fed Funds rate down to a midpoint of 4.88%. But UBS came out with a report yesterday forecasting the Fed will cut rates next year to a target range of 2.50% to 2.75% (midpoint of 2.63%). That suggests interest rate cuts of -2.75%. Granted, that assumes the U.S. economy falls into a recession. But the first cuts are expected to come before that as inflation continues to go down and the neutral rate shifts down along with it. We shall see how that all plays out. But their estimates for deep interest rate cuts of -2.75% is likely making people think that the Fed's -50 basis point forecast is much too low. Either way, we still have the rest of the year to get thru first. Not to mention today's PPI report. But the Q4 rally is off to the races. And I would not be surprised to see the major indexes make new highs for the year before 2023 comes to a close. See you tomorrow, [Kevin Matras - Signature] Kevin Matras Executive Vice President, Zacks Investment Research [Only own the best: 7 stocks poised for greatness in 2024]( The uncertainty rattling the markets is off the charts. But according to one of America's leading tech investors, if you're looking to protect your portfolio from the chaos and even significantly grow it in 2024... You need to own these 7 stocks. [Click for FREE report.]( Most Popular Articles from Zacks.com [Decade of Success: 3 Buy-Rated Stocks with 20% Annualized Returns]( We selected three stocks that have all outperformed the S&P 500 over the last decade, providing at least a 20% annualized return. [Read More »]( [These 4 Retail Stocks are Forecast to Beat Earnings Estimates]( Retail is an incredibly challenging industry, and this year more than ever has demonstrated to investors what works and what doesn't. 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