This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. More churn with the slightest upside bias, on the final day of a quarter – which usually mean mechanical moves that often add temporary pressure near the close of trading. With a 14% year-to-date gain and bond prices still down for the year, and heavy rebalancing action from huge hedged-equity funds, the pull is toward a stuck market at the index level with offsetting moves underneath among stocks and sectors. Since the March 2020 low, there's been a bit of a pattern of the S & P 500 stalling or softening up in the final week or two of a quarter and then releasing higher into the new period. S & P 500 returns in the first five days of a quarter since Q2 2020 have all been positive with an average gain of 2.3%. Is this just cherry-picking dates in a strong bull market? Coincidence? Has it already been noticed and front-run this time? Who knows? The story for the month and the week has been a draining of macro enthusiasm, a shift away from a "run it hot" economy toward a more measured, uneven global expansion but still a generally favorable backdrop for risk assets. Inflation expectations have collapsed from multi-year highs, buying the Fed time to sort through its plans for a QE taper rollout. The headlong rallies in value/cyclicals have run into pullbacks but have not decisively rolled over. Same with the 10-year Treasury yield. "Real" yields, adjusted for lower market-implied inflation expectations, are not down as much as nominal yields are. The true defensive sectors – staples, utilities – are not showing any real life, which lends some comfort that the market isn't sniffing out overt economic trouble, just moderating growth as housing, manufacturing, labor market adjust to supply/demand imbalances. Key bullish supports for the market outlook: it's a bull market, strong first halves (12%+ gains) tend to see further upside, credit markets are ripping-strong. The "yeah but" complicating inputs: market breadth has been unimpressive suggesting a choppy/maturing bull phase, flatter yield curve unwelcome, earnings forecasts are almost "too strong" and hint at future disappointment in stock reactions and equity allocations are already historically high. ADP jobs number a nice upside surprise but no real market relevance. Not a great leading indicator of government employment stats and right now it doesn't seem the Fed's needle on policy reaction will move too much on the Friday print. Too much room left to go on the employment side for a single month to swing expectations, but then again the market has been known to swing at shadows from time to time. Semis breaking out to a new high after months of sideways action an outright positive for the broader tape, though very reliant on NVDA and comes as transports, homebuilders and materials stocks are hovering near 8-10% pullbacks. Active IPO slate is mainly just a bull market acting like a bull market, though can tip into excess supply/froth at some point (as it did in the first quarter with IPOs and SPACs). Sentiment is comfortable, maybe on the verge of too happy, but I continue to say the constant rotations and indecisive leadership of the market has kept any one faction of investors from feeling as if they have it figured out, which should keep overconfidence at bay while it lasts. The Investors Intelligence weekly bull-bear spread among investment advisors is re-approaching the top of the range but not really a red flag given the market itself at a record. Today's market breadth leans slightly positive. VIX steady but maybe going to be sticky in going any lower now that it's at the bottom of the 16-month range and we have the jobs number ahead.
A trader works on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 30, 2021.
Brendan McDermid | Reuters
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.