This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. An erratic tape, still in the "chop zone" but so far downside is pretty contained. Selling the open has become the new play. Clearly some tactical caution among institutions and wariness about seasonals, the Federal Reserve, and the summer slowdown's effect on Q3/Q4 earnings. But is this pattern now too obvious to continue? And is it a win for the optimists that all this intraday slippage has netted out so far to a decline of less than 2% in the S & P 500? This is also occurring as we're caught in the now-notorious options-expiration-week vortex. As noted, the S & P 500 the past few months has been weak into about the 19 th of the month (near expiration) then rebounded. Complicated options flows and dealer-hedging activity is part of this story (I think getting a bit overplayed/self-fulfilling, but a real thing in the absence of major macro/earnings drivers). Cooler than expected CPI print – especially the core number – a relief for investors worried over inflation and how close the Fed might be to a rate hike. Also dragged Treasury yields down and flattened the curve, which has for now made it a growth-over-cyclicals day. CPI fits with the "transitory inflation surge" idea , with downside from several reopening-specific categories (used cars, airline tickets, etc.). The real debate is where inflation settles longer-term – near 2%, maybe 3%? Probably no significant driver of the Fed's taper decision. I think the Fed wants to get on with it soon, seeing little macro support provided by the asset buying and happy to sever it from its rate-setting policies. Market likely OK with this, though a "growth scare" in coming weeks could make it seem as if the market is fearing taper itself. Bank of America monthly fund manager survey mostly just confirms what the market told us over the past few weeks, but notable drop-off in global-growth expectations was not accompanied by much of a reduction in equity exposure. The past week could be seeing some convergence of mood and portfolio. Still supports the idea that expectations have reset lower, which is a net positive for the market looking ahead. Semis are perky, a bright spot within quasi-cyclicals, though now diverging from traditional industrials (semi index vs. equal-weight industrials): Apple shares tend to be stuck , slightly down on product-launch days. It's hanging near $150, the old highs. I view AAPL as having been revalued already in the direction of the other dominant tech platforms as principally a free cash flow and predictability machine. Any "credit" to be given for its move to software/services/consistent phone upgrades has largely already been granted by the market. Here's its free cash flow yield vs GOOGL and NDX: Overall market breadth started strong, now tilted to the downside. VIX slipping, slim index moves and passing of the CPI catalyst aren't enough to support a VIX near 20.
Traders at 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.
- An erratic tape, still in the "chop zone" but so far downside is pretty contained.