Stocks closed lower across the board yesterday.

We got good news in the morning which showed inflation, via the Consumer Price Index, coming in cooler than expected with a 0.3% m/m increase vs. last month's 0.5% and views for 0.4%. On a y/y basis it was up 5.3% vs. last month's 5.4%. And ex-food & energy, it was up 4.0% vs. last month's 4.3%.

Granted, those are still hotter than anyone would like, but the market cheered the news early on.

But retail sales via the Redbook report showed same store sales slip to 15.3% y/y vs. last month's pace of 16.5%. That's still a stellar gain, but lower nonetheless.

The NFIB Small Business Optimism Index came in better than expected at 100.1, up from last month's 99.7 and views for 99.0. But it was not enough to keep stocks aloft.

After hitting new all-time highs just two weeks ago, stocks have pulled back a bit as the market tries to consolidate recent gains.

It will continue to look for direction while it sorts thru concerns over inflation, supply and worker shortages, and the effects the delta variant will have on growth moving forward.

Traders will also be watching developments on the infrastructure bill, the budget framework bill, and the taxes to go along with it. We've already heard some of the proposals. Taxes, of course, are growth suppressors, while stimulus is a growth driver. But we'll have to see the details.

With everything expected to get a vote by September 27^th, which is less than two weeks away, we should know those details soon enough.

In the meantime, the economy continues to expand. And at an impressive pace. Maybe less than earlier forecast, but still very impressive.

We'll get another look at the economy today with the MBA Mortgage Applications report, the Empire State Manufacturing Index, Industrial Production, and the Atlanta Fed Business Inflation Expectations.

BTW, roughly 3+ weeks ago, I commented that the gap up in the S&P on 8/23 could possibly be a breakaway gap. Then, a week later, the next gap up looked like a potential runaway gap. But that second gap was filled the following week, negating the runaway gap and the forecasting that goes along with it. And yesterday, that potential breakaway gap was filled as well, negating that gap.

What does that mean? At this point nothing. The market could go right back up. Or down. That filled gap will now be looked at as just another common gap. And those don't offer any particular forecasting capability.

For the record, most upside common gaps during this bull market, have gone back up once they were filled. So there's that.

For now, the market will likely remain focused on inflation, along with supply strains and worker shortages, and the delta variant. Not to mention stimulus and taxes too. All while the economy continues to expand and corporate profits continue to surge.

See you tomorrow,