Mike Santoli’s market notes: Key S&P 500 levels, Peter Lynch on corrections, DoorDash joins party

Published Wed, Dec 9 20201:34 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. On a day dominated by DASH , the broad market dawdles. Things have slowed quite a bit, the S & P lolling around the 3700 mark for the past four sessions on modest volume. Hanging around record highs is not a bearish state, and a rest can be as good as a retreat to refresh a rally. So even if things still look over-extended and ripe for some sort of pullback (S & P 500 still 16% above its 200-day average, a level after which further immediate gains tend not to be lasting), nothing is assured. Always worth recalling Peter Lynch's line that more money is forgone by people anticipating corrections than is lost in corrections themselves. That can't be quantitatively proven but it feels broadly right. The S & P 500 at just under 3700 now is less than 2% above its intraday Nov. 9 peak (Pfizer Monday). It is just over 3% above where it closed on Sept. 2. So while the tape is stretched short term the rally downshifted months ago and now has a wider base to work with. And because earnings forecasts have gone up quite a bit for next year, the valuation optics are less scary, even if a ton of recovery has been priced into many sectors. The steadiness of the broad market, though, is being obscured by the wildness of the trendy stocks that have captivated the smartphone-speculator crowd and the hedge funds that flock with them. The DoorDash IPO is built to become one of their playthings: ubiquitously used brand, very of-the-moment business, huge promised "total addressable market" and artificial scarcity of shares (less than 12% of the company floated). As noted yesterday , this market wants to value hypothetical future dollars of revenue at a massive premium to current dollars, which in term trade rich vs. past dollars. It's a mix of patience, greed, opportunism, basic investment math (discounted future cash flows) and silliness. Are there echoes of the 1999-2000 nuttiness? Sure. But then it was far more pervasive (500 IPOs in '99, average day-one pop of +60%), went far longer (like 16 months) and didn't have the benefit of as many long-term success stories to point to (FANG, CRM, PYPL, etc). It's tempting to note TSLA going into the S & P at a $600B valuation, public market ramping the value of pre-profit unicorns, Robinhood talking about going public and a general sense of "OK Boomer" that greets anyone who questions the newly popular idea that stocks only go up. Yet at the same time we have a rebound in laggard value stocks, early-economic-cycle recovery forces in play, a highly forgiving credit market and good market breadth. On an immediate basis, market breadth is mixed-to-softer today. Credit is steady. Small-caps outperforming yet again, really front-loading that traditional January effect as has become the norm. VIX back above 21, hasn't yet broken below 20 on a closing basis post-crash. Interestingly, VIX is tracking the 2009 path just as the S & P 500 has. After the huge financial-crisis shock bottomed in March of that year, VIX peaked and trended lower until finally closing under 20 for the first time on Dec. 22. History rhyming?

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This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.

On a day dominated by DASH, the broad market dawdles. Things have slowed quite a bit, the S&P lolling around the 3700 mark for the past four sessions on modest volume. Hanging around record highs is not a bearish state, and a rest can be as good as a retreat to refresh a rally.
So even if things still look over-extended and ripe for some sort of pullback (S&P 500 still 16% above its 200-day average, a level after which further immediate gains tend not to be lasting), nothing is assured. Always worth recalling Peter Lynch's line that more money is forgone by people anticipating corrections than is lost in corrections themselves. That can't be quantitatively proven but it feels broadly right.