Mike Santoli's market notes: S&P 500 holds the Thursday low and rebounds in emotional trading

Published Fri, Mar 5 20211:26 PM ESTUpdated Fri, Mar 5 20211:27 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. A whippy market trying to contain the damage to "trendy tech," where signs of capitulation have emerged, while riding a Main Street-over-Wall Street rotation into Old Economy stocks and high-quality tech. The S & P has so far held above Thursday's low in extremely mixed and sometimes-emotional trading. Big picture, this has been a 5% S & P 500 pullback in the context of a fitful but pronounced realignment of asset prices to account for spring-loaded economy and let-it-rip Fed policy. Squint and see a double-bottom possibility but this chart shows the bulls have plenty to prove now. Along the way, the most expensive, frothy and crowded positions have been pole-axed – the "disruption trade" has been humbled and the rise of the disrupted (energy, banks, retailers) is far along. The ARKK ETF was in a sense driving the entire market this morning while in freefall, looking very much like a capitulatory purge, and its 7% bounce off the lows has sparked a broad-market bounce. Wild times. The bid in FAANMG is unsurprising and overdue. Last weekend, we wrote that FB/GOOGL were getting attractively valued and now it seems they represent quality-at-a-lower price. Still not likely to be leadership in this economy with overall S & P 500 earnings set to soar 20-25% in 2021. But there's a chance the market becomes less an all-or-nothing growth/value toggle. Very good top-line number on the jobs report , ahead of schedule on the labor recovery, perhaps, yet still it would take a couple more years at the 375k/month jobs pace to get back to Jay Powell's primary goal of full employment. Treasury yields popped then ebbed a bit. It's possible the bond market has overshot in the short term and overreacted to Powell. Though he did effectively say the market itself must search for its own pain threshold in yields so long as other financial conditions stay appropriately loose. So far, credit spreads have widened out only modestly, a plus. And VIX has been rather contained, slipping on the day into the 27s. On one hand, a high-20s VIX already implicitly prices in a 1.5% daily S & P move, so arguably it's plenty rich. And this kind of widely divergent tape with stocks and sectors going different ways tends to put a lid on index-level volatility. We're still in a zone where further chop and downside tests should not be surprising. The tape got a bit oversold but not profoundly so. Sentiment is more wary but has not reset toward fear in a big way. Everyone who doesn't own the ARK stocks is less afraid than full of relief and schadenfreude, and those who do own them are worried but may still have house money to play with. There is a mega-strong bounce in these disruptive-tech stocks coming at some point, many aggressive shorts have flocked there. We're approaching the anniversary of the March low, 12-month gains will start to look crazy high, tax day approaches, the bull-market-analogy charts from 2009 and 1982 both imply a give-back phase. And the rotation from growth (almost 40% of the S & P) into cyclical groups (27%) has come a long way already and, in any case, has the capacity to knock over more furniture as it swings around and the "cheaper" sectors look less cheap than a few months ago. Breadth is very evenly mixed though again worse on Nasdaq. Another big crop of new lows on Nasdaq.

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