Santoli’s Friday market notes: Indexes enter a confusion zone after September jobs disappointment

Published Fri, Oct 8 20211:16 PM EDT

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics Hesitant, somewhat lethargic market response to a payrolls miss that nonetheless reflects not economic weakness but a tighter-than-expected labor market with slightly hawkish implications for Fed policy. Granted the flattish indexes also speak to a tired tape after some energetic thrashing this week and a decent near-3% three-day bounce in the S & P 500 . It leaves the index roughly halfway between the Sept. 2 peak and the midday Monday lows. Unlikely that the action has changed the minds of too many short-term bulls or bears as the market operates within the confusion zone. The crucial action in Treasuries and follow-through lift in crude oil adds a bit of fuel to the reflation trade, higher yields across the curve, a market pricing in perhaps stickier inflation and a Fed on course to start the withdrawal process from its Covid stimulus efforts. The 10-year yield shot higher than this in the spring but 1.6% is viewed as a bit of a crucial spot, roughly the shelf from which yields crashed as the Covid shutdown set in. Bank stocks still feeding off the yield lift and energy retains upside momentum, though not exactly an urgent rush toward the cyclicals or flight from growth groups. Broader picture: The S & P 500 tagged the +20% YTD gain level coming into September with investors all-in on stocks and riding long win streaks of monthly gains and time without a 5% pullback. Time and mean-reversion caught up to the indexes, a reset underway to account for a mixed growth picture and policy static in a tougher seasonal period. The indexes – especially Nasdaq 100 – got quite oversold into the Monday low, sentiment turned nice and fearful. Stocks have bounced nicely, but the rebound stopped at "logical" levels to keep everyone guessing. It remains unlikely that the S & P 500 would have peaked for the year on Sept. 2, given the history of similar years, where we are in the cycle and the pattern of how the first 5% pullback in a long time tends to play out. This would mean this ultimately is or will become a buyable correction, given the calm waters in the credit markets and flush corporate coffers. These are all tendencies, not guarantees, and worth noting the times when we say a late-summer market peak for a year (2015, 2018 most recently) it was when there was both a perceived global slowdown and a perception of a rigid Fed trying to tighten. Market breadth is evenly split, and the equal-weight Russell 1000 nearly precisely flat. VIX is slipping, typical in a sluggish tape. With a big data release past and ahead of a weekend. Under 19 for the first time in ten days, still on guard for whippy action and seasonal flux.

A trader works on the floor of the New York Stock Exchange (NYSE) in New York, Sept. 20, 2021.

Michael Nagle | Bloomberg | Getty Images

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

Hesitant, somewhat lethargic market response to a payrolls miss that nonetheless reflects not economic weakness but a tighter-than-expected labor market with slightly hawkish implications for Fed policy.

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