The market was awe-inspiring, and even if it seems insignificant in the grand scheme of things. Remember that those who attack humanity often use the stock market as a scorecard for their goal of creating pain.

The back-to-back sessions were awe-inspiring, and, now, the S&P 500 must fill a gap at 4,400.

Secret Sauce

The McRib is back, and so are ‘up’ days in the stock market.

Breadth was more impressive on the New York Stock Exchange (NYSE), reflecting a move into blue-chip names for greater comfort.

Market Breadth	NYSE	NASDAQ
Advancers	1,962	2,051
Decliners	912	2,176
New Highs	28	39
New Lows	99	321
Up Volume	2.00 billion	2.08 billion
Down Volume	1.10 billion	1.72 billion

(Real) Secret Sauce

Two Fed officials spoke yesterday and acknowledged how yields could influence them to slow down on rate hikes.

The Inflation Outlook

The first category, core goods inflation, the red line in figure 2, has slowed strikingly, as supply chain–related price pressures continue to ease. The second category, housing services price inflation, the black line, has clearly stepped down, as was anticipated given the previous slowing of increases in rents for new tenants. In contrast, price increases for the third category, core non-housing services.

The Labor Market

Improvements in labor supply are also contributing to rebalancing the labor market.

Aggregate Economic Activity

Despite the signs of resilience in the economy this year, some analysts expected slower economic growth this fall, which leads me to the next topic: What are some near-term risks facing the U.S. economy?

Risks Facing the U.S. Economy

So far, the economy has been resilient, and inflation has been subsiding; however, I attach a high degree of uncertainty to my outlook and see multiple risks.

On the Transmission of Monetary Policy

As you know, monetary policy is transmitted to the rest of the economy by affecting broad financial conditions, including market interest rates.

Monetary Policy Considerations

After increasing the target range for the federal funds rate by 525 basis points since early 2022, my view is that the FOMC is in a position to proceed carefully in assessing the extent of any additional policy firming that may be necessary. We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive. good reason for holding the policy rate constant at our most recent FOMC meeting.

-Dallas Fed President Lorie Logan

Calendar

It's always good to hear from small businesses, even if the news hasn’t been good for long. After today, the data gets hot and heavy.

Key Charts

Don’t look now, but the Russell 2000 has rallied four days in a row.

Bespoke Research

Today’s Session

Pepsi (PEP) posted financial results that beat the street and fat loss drugs, but management is worried the dollar is too strong.

Organic growth is very impressive, and the stock is higher pre-open; although, it is off the highest levels of the morning.

Consumer Staples Breaking the Freefall

Consumer Staples have been a disaster.  There is a ton of room to run on the upside before running into any major resistance.

The NFIB Small Business Optimism report came in below expectations and it’s all about that gut feeling and outlook being negative to desperate.

Encouraged by the way the market has closed the last two sessions.

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