Mike Santoli’s market notes: Strong and broad bounce, but no free ticket to the new-high express

Published Mon, Mar 1 202112:29 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. First-of-the-month flush of new cash and a calmer bond market drives a strong and broad bounce in the indexes, back up to the area where the S & P 500 spent most of February. Key points made last week: Market bent but never broke, S & P was always in "normal pullback" zone, credit indicators never showed any real stress, financials/industrials were cooling from overbought levels, bonds probably hit a selling crescendo. About half of today's bounce is a recovery of the late-Friday rebalancing dump, the rest is a cooling off of yields propping growth stocks and some expected but powerful incremental progress on vaccines, fiscal firepower and a strong manufacturing data point this morning. Noted all last week the S & P was struggling to find a floor near January's highs, just as in January the index quit falling near December's highs. Pretty textbook bull-market action, though with a bit more give to the downside as the reopening gets pretty well priced in and yields have got equity folks' attention. Bullish for sure, but no free ticket to the new-high express. Pretty much everything participating to the upside so far Monday, as opposed to the binary "growth or cyclical but rarely both pattern of recent months. Here's the past year of Nasdaq 100 vs SPHB (a good cyclical/value proxy). From 3/1/20 to 9/1/20, Nasdaq 100 outperformed by 30 percentage points, since 9/1/20 SPHB has outperformed by a similar margin. Would make sense fairly soon for things to become a bit less stark. Name by name/sector by sector. "Quality" stocks including FAANMG look smore modestly valued now but reflect a defensive trade that seems out of step with the current enthusiasm for a burst of reopening spending. Dividend growth makes a lot of sense on paper but is sooo boring. Financials/industrials no longer cheap but news flow has their back. Spring-loaded, savings-rich economy getting another $1.5 trillion plus and a Fed trying its best not to counter it – a tough thing for skeptics to fight if the bond market itself is not going to get agitated. The 10-year Treasury settles back but only to 1.4% - the old "floor" on the chart. Market internals super-strong, folks will be talking "breadth thrust" again – something like a one-day buying panic. Historically bullish in the intermediate term though they've become so much more common lately there seems a structural change responsible in part (ETFs, etc). VIX in mini-crash mode, down more than 4 points, back ion the low-20s neutral zone. High-yield credit spreads coming in hard as the aggressive risk bid returns.

Traders on the floor of the New York Stock Exchange

Source: NYSE

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