This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Whiffs of "peak growth rates" colliding with a fully-invested investor base after a rare market win streak leads to a test of buyer's resolve following Friday's levitation act. Noted late Friday that jobs-day rallies carried by a "mission accomplished" feeling can often be short-term culmination moments (happened June of last year most notably) and that the S & P was getting slightly overbought. Not really a reassessment of benign employment data as much as an excuse to take some back after a seven-day upside streak and five straight quarters of at least a 5% gain in the S & P 500. For now, on a purely tactical level, the index is just perhaps filling that gap from Friday's open. This downside wobble still leaves the index very much in its persistent uptrend range. Downside tilt to services ISM number today and continued rally in Treasuries inflicting maximum pain on bond bears by pressing 10-year yields below 1.4% is crunching the cyclicals, financials and small-caps. As noted in recent weeks, these groups had yet to fully surrender longer-term leadership status but it was getting close. When today's market plays defense, it grabs for the massive incumbent digital platforms. Today, ten-month laggards AAPL and AMZN almost alone holding the S & P together at less than a 1% drop. Still not much help from traditional safety groups staples and utilities. No one thinks there is genuine recession risk or any such thing, so it's all about acceleration or deceleration and using yields as the beacon for where to send the incremental dollar. Noted the uncommon win streaks we've been on across days and quarters. History says when they end it's rarely the Big Top, but also rare for the market to rush higher from this point and never look back. Typical chop, made uncomfortable by narrative flux (Is it still a boom or not? Will the 10-year yield collapse back toward 1%?) and midsummer illiquidity. China crackdown on Didi and signals to big Chinese companies to curtail their global ambitions and openness to foreign capital adding a chill to one corner of the market where some hot money had rushed in. Probably no huge immediate spillover to more domestic sectors and U.S. software is among the leading groups today. Healthcare and other "quality" regions of the market have found a bid in recent weeks, and within healthcare medical devices (very growth-y, not very linked to macro, good demographic backdrop) is now neck-and-neck with semis the past four months in a race of groups that make "smart components" for either machines or humans. Everyone knows earnings for the second quarter will be flamboyantly higher and likely far better than lagging forecasts. But we also knew this the past three quarters and saw more "sell the news" than "buy the beat" responses. Definitely helping to support valuations but unclear if profit season in itself will be a market-wide catalyst. Still worth noting that Q2 earnings, even after big upward revisions, remain way below where they were seen heading right before the Covid crash. Good reminder that the usual pattern is for year-ahead earnings estimates to be too high. Been noting that market breadth has been a weak point of the recent rally, though not a fatal one. Today on the NYSE we see a pretty broad flush lower, 80% of volume to the downside. Nasdaq not bad, closer to 50-50. Credit conditions have been a stalwart foundation for equities. They remain healthy but softening up a bit today and junk-bond and high-grade bond spreads can hardly be expected to improve too much from here given how already-tight they are. VIX is registering the S & P slippage as well as the rebuild of volatility pricing after a three-day weekend. No real panic, as there probably shouldn't be. But we'll see.
Traders on the floor of the New York Stock Exchange
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.