Stocks End Mixed, Small And Mid-Caps Lead Ahead Of This Morning's PPI Inflation Report

Market Moves You Need to See Stocks End Mixed, Small And Mid-Caps Lead Ahead Of This Morning's PPI Inflation Report [Kevin Matras - EVP - Photo] Profit from the Pros By Kevin Matras Executive Vice President Stocks End Mixed, Small And Mid-Caps Lead Ahead Of This Morning's PPI Inflation Report [Stocks End Mixed, Small And Mid-Caps Lead Ahead Of This Morning's PPI Inflation Report]Image: Bigstock Stocks closed mixed yesterday with the Dow modestly in the green, while the S&P and Nasdaq closed moderately in the red. But it's worth noting that the small-cap Russell 2000 was up 0.30%, and the mid-cap S&P 400 was up 0.34%. The market overlooked the previous day's slightly higher than expected inflation report, as it was not enough to derail plans for cutting interest rates. While it shows the Fed is justified in being patient, it also shows that inflation has fallen significantly since the summer peak of 2022, and cutting rates is warranted this year. With interest rates at a midpoint of 5.38%, it's already 168 basis points above the current inflation levels based on the core Personal Consumption Expenditures (PCE) rate of 3.7% y/y. (The PCE index is the Fed's preferred inflation gauge. The next one is March 29.) If one were to assume that 100 basis points above inflation is the natural rate (aka the neutral rate), to allow growth, but keep inflation steady, then bringing rates down to 4.70% is where things should be now (which is -68 basis points below current levels). That suggests 2-3 quarter-point rate cuts. And that is still in line with what the Fed has forecast. We'll hear more from the Fed and their thoughts on rate cuts next week when they make their FOMC announcement on Wednesday, March 20. They are expected to begin talking about when the rate cuts will start, and how big these cuts will be. Whether they come to a final decision, we'll have to wait and see. But the conversation, which Fed Chair Jerome Powell insists they haven't even begun to talk about yet, will likely get the formal discussion it deserves. In the meantime, we'll get one more piece of inflation today. And that's the Producer Price Index (PPI) inflation report. The CPI report on Tuesday was retail inflation. The PPI today is wholesale inflation. The headline number is expected increase by 0.3% m/m, in line with last month's pace, while the y/y rate is expected to come in at 1.2%, up from last month's 0.9%. The core rate (ex-food & energy) is expected to be up 0.2% m/m, less than last month's 0.5% pace. The y/y rate last month came in at 2.0%, up from the previous month's 1.8%. The report comes out 8:30 AM ET. In addition to the PPI report, we'll also get Weekly Jobless Claims, Retail Sales, and Business Inventories. We'll also get more earnings with another 186 companies on deck to report, with marquee names like Dollar General, and DICK'S Sporting Goods reporting before the open, and Adobe and Ulta Beauty going after the close. But the PPI report is the main event today. Should be a busy day. See you tomorrow, [Kevin Matras - Signature] Kevin Matras Executive Vice President, Zacks Investment Research [Turn Time Into Income Without The Hustle]( How To Improve Your Trading by Investing The easy way to turbocharge your passive investing plans using what Einstein coined as "the eighth wonder of the world". [Get Your Passive Income Accelerator]( Today's Top Research [Medical Devices ETF Hits 52-Week High: Stocks to Watch]( Historically viewed as a defensive area, healthcare also boasts many growth aspects and benefits. 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