This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. A gentle follow-through to Friday’s rally, as the S & P 500 goes a full month without making a fresh bear-market low, and the rebound makes a bid to nudge above its three-month down trend. Several hurdles are nearby from here, up above 4,000 on the S & P 500. The market has continued to act as if it’s somewhat “sold out” in the short term, with tactically oriented pros “de-risked” coming into the third quarter, as well as early weakness and late-day strength the pattern lately. No new lows in recent weeks despite another too-hot consumer price index report and a brief scare the Federal Reserve would hike 100 basis points next week is at least a small gesture of resilience. The bull case from here is built around four potential peaks: peak inflation, peak oil prices, peak bond yields and peak Fed hawkishness. None of these is a sure thing, but the market has clearly tried to move beyond the springtime inflation-panic and is pricing in peak fed funds rate within about a six-month window. The cautionary response to this is that time and trend remain, for now, the bear’s friend. It will take time to disprove that a recession awaits us and to see whether the Fed eases off its hawkish push in coming quarters even in a best case, while the broader trend in equities as well as credit spreads remains challenging and would take time to repair. Earnings from banks on balance have been better than feared : no real erosion in credit performance among consumers or companies and renewed focus on the net-interest boost to come. Still, the banks were pretty hard-hit entering reporting season, and the recent bounce looks rather muted on a year-to-date chart. Much left to prove. Been making the case for weeks that equities valuation compression reflects significant doubt about earnings-forecast reliability being priced in. So far, this idea has not been disproven. We’ll see how much of a toll consensus estimates might suffer in coming weeks. Outside of the elite megacap heavyweights, valuations are undemanding — if not yet cheap enough to just “close your eyes and buy.” Recent leadership by growth stocks, beat-up speculative tech and even homebuilders despite ugly data and Monday’s bleak builder survey hints at the laggard “epicenter” groups finding relief. Yet this also can simply be typical “counter-trend” action in a bear-market rally, so extrapolation of a leadership shift from the recent moves is probably premature. Barry Bannister at Stifel reiterating his call for a growth/cyclical-led summer rally to 4,200 on the S & P 500 today, a plausible notion that would probably take the index to a level of much mutual pain – bulls thinking it could be an all-clear, bears taking lumps for fighting the ramp. Perhaps it’s telling that it seems an aggressive bullish call to many when it would merely mean the S & P 500 retracing half its maximum loss from 4,818 to 3,636 from January to June. Many ways to illustrate the purge of speculative bullishness and defensive tilt of investors now. Overall positioning in index futures by large funds steeply net short … … while Deutsche Bank shows the performance of the stocks with the heaviest call-option volumes has turned negative, a sign the retail crowd stampeding into favorite names no longer works to goose share prices. Market breadth is strong again: more than 80% upside volume, even as overall turnover is light. Energy sector’s sharp correction being bought briskly. VIX hovering in the 24s, a very small Monday rebuild of premium. A low end of the range, not yet low enough to charge “complacency.” VIX futures slope upward over coming months, a benign setup for now.
Traders on the floor of the NYSE, June 29, 2022.
Source: NYSE
This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics.
A gentle follow-through to Friday’s rally, as the S&P 500 goes a full month without making a fresh bear-market low, and the rebound makes a bid to nudge above its three-month down trend.
 Several hurdles are nearby from here, up above 4,000 on the S&P 500.
The market has continued to act as if it’s somewhat “sold out” in the short term, with tactically oriented pros “de-risked” coming into the third quarter, as well as early weakness and late-day strength the pattern lately. No new lows in recent weeks despite another too-hot consumer price index report and a brief scare the Federal Reserve would hike 100 basis points next week is at least a small gesture of resilience.
The bull case from here is built around four potential peaks: peak inflation, peak oil prices, peak bond yields and peak Fed hawkishness. None of these is a sure thing, but the market has clearly tried to move beyond the springtime inflation-panic and is pricing in peak fed funds rate within about a six-month window.
The cautionary response to this is that time and trend remain, for now, the bear’s friend. It will take time to disprove that a recession awaits us and to see whether the Fed eases off its hawkish push in coming quarters even in a best case, while the broader trend in equities as well as credit spreads remains challenging and would take time to repair.
Earnings from bankson balance have been better than feared: no real erosion in credit performance among consumers or companies and renewed focus on the net-interest boost to come. Still, the banks were pretty hard-hit entering reporting season, and the recent bounce looks rather muted on a year-to-date chart. Much left to prove.
Been making the case for weeks that equities valuation compression reflects significant doubt about earnings-forecast reliability being priced in. So far, this idea has not been disproven. We’ll see how much of a toll consensus estimates might suffer in coming weeks. Outside of the elite megacap heavyweights, valuations are undemanding — if not yet cheap enough to just “close your eyes and buy.”
Recent leadership by growth stocks, beat-up speculative tech and even homebuilders despite ugly data and Monday’s bleak builder survey hints at the laggard “epicenter” groups finding relief. Yet this also can simply be typical “counter-trend” action in a bear-market rally, so extrapolation of a leadership shift from the recent moves is probably premature.
Barry Bannister at Stifel reiterating his call for a growth/cyclical-led summer rally to 4,200 on the S&P 500 today, a plausible notion that would probably take the index to a level of much mutual pain – bulls thinking it could be an all-clear, bears taking lumps for fighting the ramp. Perhaps it’s telling that it seems an aggressive bullish call to many when it would merely mean the S&P 500 retracing half its maximum loss from 4,818 to 3,636 from January to June.
Many ways to illustrate the purge of speculative bullishness and defensive tilt of investors now. Overall positioning in index futures by large funds steeply net short …
… while Deutsche Bank shows the performance of the stocks with the heaviest call-option volumes has turned negative, a sign the retail crowd stampeding into favorite names no longer works to goose share prices.
Market breadth is strong again: more than 80% upside volume, even as overall turnover is light. Energy sector’s sharp correction being bought briskly.
VIX hovering in the 24s, a very small Monday rebuild of premium. A low end of the range, not yet low enough to charge “complacency.” VIX futures slope upward over coming months, a benign setup for now.
