Santoli: The S&P 500 tests a lower range as major banks dip on earnings and high rates squash tech

Published Tue, Jan 18 202212:47 PM ESTUpdated Tue, Jan 18 20221:31 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. Another turn of the ratchet as the market positions for higher rates and absorbs squishy short-term growth data even as forward-looking indicators show a reacceleration as omicron peaks. Notable wrinkle in the vaunted growth-to-cyclicals rotation as financials backslide on imperfect earnings reports after fast money chased them higher. Have been noting that the value outperformance looked stretched and the banks and energy have a lower valuation ceiling than secular-growth stories. Still, it so far amounts to another trip to the lower end of what appears – in the optimistic case – as a new range (between, say, 4,500 and 4,700 on the S & P ). Just undercut last Monday's intraday low and touched the 100-day average. Bit of a bounce so far from right there, in the zone where we've seen bidders show up recently. Internally the market is not yet particularly oversold, as these looks at the percentage of S & P 500 stocks beneath key moving averages show. The September/December pullbacks finished with more stocks having succumbed. Nothing says things must get extreme for the market to solidify, but that's often an ingredient for decisive rebounds out of the range. The Microsoft deal to buy Activision is opportunistic and financially rational even beyond any speculative objectives around the metaverse or whatever. Rounds out the gaming vertical within MSFT , makes use of the copious free cash the company has to spend and puts competitors on the defensive all for the cost of about 3% of MSFT's market value. As noted in my weekend column , the market has already gone a long way toward accounting for slightly higher yields and modest growth headwind from a tightening posture from the Fed. The market has already begun rationing capital harshly (see the carnage in pre-profit companies, small caps, etc.) as the Fed has literally done nothing but talk. One could argue that the recent talk of a half-point hike in January is even causing some overshoot in market expectations vs the likely policy path. We'll see. Breadth today is weak but no washout yet, about 80% of volume to the downside. VIX pretty contained – w