Santoli: Stocks attempt to find traction as investors anticipate key inflation report

Published Tue, Feb 8 20221:33 PM ESTUpdated Tue, Feb 8 20222:52 PM EST

This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. The market action this week is indecisive — middle of the 2022 range and even last week's range, more drift than determined movement — but it is suggestive of a firming up of demand for stocks below the surface. Similar to Monday: more stocks up than down and rotation toward cyclicals with some participation from rebounding growth leaders. The equity market is surely in suspense over Thursday's CPI report but has so far absorbed rapidly rising yields globally and a radically repriced outlook for the Federal Reserve's tightening while remaining well above the Jan. 24 lows. A "tell" or a "trap?" The S & P 500 is getting clenched in here, between the minor rally line and the run of lower highs since Jan. 3. It's all pretty neutral. The next move is an eye-of-the-beholder exercise, but there's a bit more evidence of traction than slippage under the surface, with the equal-weighted S & P opening a lead on the top-heavy benchmark version since the market peak: The 10-year Treasury on the cusp of a 2% yield, released higher in part by European yields ripping to create some slack in the tether than connects them. This has come after months of radical market adjustment to several Fed hikes this year, with an appreciable possibility (based on market pricing) of a half-percent hike in March. It's still not the likely preference or probability, but after Thursday's CPI if the market still sees a 1/3rd or better shot at 50 basis points in March, Fed officials will likely have to get out and either talk down this prospect or implicitly endorse it. Either way, the market sees a fast but not particularly protracted tightening campaign, likely restraining inflation well and not pushing short rates above 2%. Meantime, financial stocks are feasting on the expanding pool of passive interest income on offer. Energy, very overbought, is in retreat along with crude. As energy peaked and slipped for the morning, the Nasdaq 100 perked up, showing the market's rotational playbook still in effect. FB is down on the day but up $3 from its morning low on heavy volume. Perhaps the stock is making a first game-bottoming attempt since its collapse — this one occurring right near its immediate pre-Covid crash level. Credit markets are firming back up a bit today, easing one of the big worry points of investors. Spreads had widened but from quit