Santoli’s Tuesday market notes: Salvage buyers snap up tech and drive Nasdaq’s rally, indexes soar

Published Tue, Dec 7 20211:09 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. One of a bull market's best friends is the scare that proves unfounded or overstated. Something like that is playing out now. The exaggerated shift to fear from confidence in recent weeks is now seen as unwarranted with the macro recovery picture intact: Omicron appears manageable and investors have digested the Federal Reserve's shift. A pretty forceful version of the post-shakeout recovery pattern underway, essentially gets that market back to its early-November high, at which point everyone was a bit too complacent about the certainty of a year-end rally. Complacency was shaken out, the indexes bent but didn't break for the third or fourth time this year. S & P 500 was off a quick 5%, with much worse damage below the surface purging crowded positions and resetting sentiment toward caution. This means the market is probably in a better spot now with S & P near 4,690 than it was Nov. 5 at the same level. That's about when I suggested in a column that the market needed to cool off to avoid an unstable, overheated melt-up. Every day without alarming news on omicron severity rebuilds macro confidence. The Fed's stance is digestible with the economy doing well, housing very strong, etc. "Get the taper done and then see if we get lucky on inflation" is how I read their plan. Everyone now thrilled the S & P has bounced back up to levels they were terrified we'd break to the downside two weeks ago: S & P 4,650-ish. Chart looks like 4,700 could be tough to crack on the first attempt, but this two-day rally is broad and shows real money reactivated in equities. Entering the week the only things that gave an opportunistic stock buyer any pause were the Treasury, credit and the volatility markets showing renewed stress but now all are easing fast. The 10-year Treasury seems to have lifted off an important pivot level near 1.4%, avoiding a new breakdown. The high-yield debt market had seen spreads widening out into the weekend, not at critical levels but heading the wrong way. Massive tightening the past two days as seen in the surge of HYG versus the IEF Treasury ETF : The big tactical risk entering the week was the contorted VIX futures (near-term contracts priced above those further out) meant forced selling, deleveraging would continue even in an oversold market. Noted here, this s