Stocks End Mixed, All Eyes On This Morning's CPI Inflation Report

Market Moves You Need to See Stocks End Mixed, All Eyes On This Morning's CPI Inflation Report [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks End Mixed, All Eyes On This Morning's CPI Inflation Report [Stocks End Mixed, All Eyes On This Morning's CPI Inflation Report]Image: Bigstock The big three indexes closed mixed with the S&P and Nasdaq in the red, while the Dow was in the green. But the small-cap Russell 2000, and the mid-cap S&P 400 soared by 1.75% and 0.95% respectively. Stocks were up for much of the day before paring back gains or going negative by the close. But the small and mid-cap indexes remained firm, finishing near their highs of the day. Although, I should point out that the big three indexes have all outperformed the small and mid-caps this year, so there was bound to be some catch up action. And we saw some of that yesterday. But there's likely more of that to come. That doesn't mean the big three have to go down in order for the other two to catch up. They can all go up at the same time too. But I'm expecting to see the small and mid-caps finally putting in more outsized gains. Earnings season continues on. Today, before the open, we'll hear from Coca-Cola, Shopify and Zoetis to name a few. And after the close its Airbnb, AIG and Akamai. All in all we'll hear from 306 companies today. But there's only 2 economic reports out today. One is the NFIB Small Business Optimism Index. And the other is the Consumer Price Index (CPI) inflation report. The consensus is calling for a 0.2% m/m increase in the headline number, and a 3.0% y/y print, which would be a decrease from last month's 3.4%. The core rate (ex-food & energy) is expected to rise 0.3% m/m, in line with expectations, while the y/y rate is expected to come in at 3.7%, down from last month's 3.9%. If so, that would continue the trend of falling inflation rates. After today, however, we'll get another inflation report later in the week on Friday. That will be the Producer Price Index (PPI) inflation report. The CPI conveys retail inflation, and the PPI is wholesale inflation. Although, the Fed's preferred inflation gauge is the Personal Consumption Expenditures (PCE) index. That doesn't come out until February 29. But they've all been following the same trajectory, which is significant easing from their peaks in 2022. Nonetheless, the first inflation report on deck is the CPI this morning. That comes out at 8:30 AM ET. In spite of meaningful progress on inflation, it's still too high. Couple that with a robust labor market and resilient economic growth, and that's why the Fed seems reluctant to cut interest rates at their March meeting. Some are even speculating they might skip May as well and wait until June. That's all conjecture. But the market doesn't seem to mind the apparent delay to the official start date to rate cuts, since we only seem to be talking about a few months. And that's why stocks continue to climb. According to the Fed, rate cuts are still coming. And that's why traders have been piling into stocks. Barring any surprises, this morning's CPI should confirm that inflation continues fall. And that means interest rates should eventually follow suit. And that's bullish for stocks. See you tomorrow, [Kevin Matras - Signature] Kevin Matras Executive Vice President, Zacks Investment Research [See Zacks' Top Stocks for Free]( Starting today, you can get instant access to the latest picks from our time-proven strategies which since 2000 have soared far above the market. While the S&P 500 averaged +7.0% per year, our top strategies averaged gains as high as +44.9%, +48.4% and +55.2% per year. 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