Santoli’s Tuesday market notes: Stocks fall after Powell's comments on speeding the taper. There is no place to hide

Published Tue, Nov 30 20211:41 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. An unsteady market got an extra push from an unexpected hawkish tone from Federal Reserve Chair Jerome Powell, providing a sharp excuse to probe slightly below Friday's low in search of dip-buyers' conviction. The set-up was a respectable but (as noted at the time) highly imperfect bounce Monday, one dominated by a few huge defensive growth stocks as the majority of names fell. And any investors hoping that renewed Covid-variant uncertainty would buy the market some slack in terms of a dovish bias from Powell got more focus on inflation and mention of an accelerated tapering of asset purchases. The tape action clearly shows a combination growth scare, repricing for a tighter, more inflation-fighting Fed (much flatter yield curve), impulse to take profits and book tax losses, and general "fog of war" risk aversion given the unknown threat of omicron on global economies. Boil it down, though, and we remain in an anxious but still-routine pullback zone with the S & P 500 levels cited yesterday in the 4,530s (both the 50-day average and the summertime high) about a half-percent below. Might that be a consequential traction point for a good rebound attempt if it's visited? The market's read on Powell, even when he was reappointed last week, was that he might now be freer to be seen as responding to inflation now that his perch was secure. Perhaps, at least in his rhetoric and in Congress. He and the rest of the Fed have long realized that the asset purchases are no longer doing anything for the economy if they ever did, purely a signaling mechanism to say rate hikes are a long way off. So tapering quickly should have few real-world risks. Still, every dovish surprise comes from a hawkish rhetorical turn that preceded it. If the variant proves a true threat and the economy is seen as vulnerable (and/or if markets reprice radically in that direction), there's no way the hawkishness survives. Market-based inflation gauges are already off the boil, Powell remembers the late-2018 market panic on superficially restrictive Fed guidance and no hikes are likely unless and until the economy and markets are ready and asking for them. Which still leaves the market having to deal with the information deficit on the global reacceleration of growth that had been baked into many intentions and then a general reassessment of equity exposures in a higher-volatility tape with perhaps too many complacently positioned for a year-end ramp. Could it be a good thing, eventually, that the Nasdaq 100 names are offering no haven today, falling just about as much as the S & P 500 and Dow Industrials ? A more indiscriminate no-place-to-hide dynamic can help move sentiment closer to a panicky flush. Market breadth is wretched as it was on Friday: 92% of NYSE volume in declining stocks, which would follow 90% downside skew on Friday. Some technicians view such clusters of lopsided selling pressure as foreboding in the short term, but is certainly making the market pretty oversold in the short term and susceptible to a bounce before too long. Credit markets are starting to register the worries a bit more pointedly, which is a net negative but not quite at critical levels. High-yield debt spreads widening toward their weakest levels of July and August. VIX popping toward Friday's highs, above 27, negating the immediate "all clear" signal, though a lower high in VIX as the S & P reaches a lower low for this pullback can often be a helpful signal. VIX futures setup is agitated (VIX above futures prices for the next few months, often the sign of a strong but passing storm) but not yet signaling intense ongoing stress.

A trader works in his booth on the floor of the New York Stock Exchange (NYSE), November 26, 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.

An unsteady market got an extra push from an unexpected hawkish tone from Federal Reserve Chair Jerome Powell, providing a sharp excuse to probe slightly below Friday's low in search of dip-buyers' conviction.