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Before The Bell - September is thus far living up to its reputation as a choppy month for stocks. No particular path is set in stone, but lately the set of divergent forces influencing the market has been giving more mixed signals than in the recent past. That has chipped away at the raging bullish sentiment that lifted the major averages to one record after another earlier this year.

On the plus side, the economy is undeniably enjoying a major upturn in its recovery from the shutdowns caused when the coronavirus first hit. Business data released on Thursday showed a surprise increase in retail sales for August, when a decline had been the expectation. That news lifted the shares of several retailers, and offered an indication that consumers remain enthusiastic about spending.

Initial jobless claims ticked higher, though, hinting that the job market is being affected at the margin by the spread of the Delta variant. Moreover, employers in certain cases are willing to hire, but a number of workers appear somewhat reluctant to take positions where they may have more of a risk of contracting COVID-19. That snag seemed to come through with the less-uplifting-than-expected government employment released earlier this month. A percentage of prospective employees may be uncomfortable with requirements to wear masks all day, as well.

Broadly, investors expected the difficulties caused by COVID to have receded to a greater extent by this time, instead of having to gauge the effects of the Delta strain on the economy and earnings. At the same time, inflation, ongoing supply-chain disruptions, and the ripples caused by regulatory tightening on China-based companies also make it tougher to look past generous stock market valuations.

Despite the hurdles, prospects for a durable expansion and continued low interest rates remain fundamental underpinnings for the bulls. 

The Federal Reserve meets next week, and is broadly expected to reaffirm its position that no rate hikes are in store for the foreseeable future, likely at least through 2022. The Fed may announce a timeline for a slowdown in its asset purchase program, though.

Thursday’s market action saw a drop in the Dow Jones Industrial Average of 63 points; a seven-point dip in the S&P 500; but a 20-point gain on the NASDAQ.  

This morning, stock futures are mostly flat about a half hour before the opening bell. Data on consumer sentiment to be released this morning may provide some direction.  - Robert Mitkowski   

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.