This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. A sigh of relief can fill the market's sails by only so much. A better-than-feared core inflation number for March encountered a market braced for worse, allowing bond yields to relax lower from overstretched levels and the big equity indexes to recapture part of Monday's decline. Nothing much resolved from a longer-term perspective, though. The S & P 500 remains within a "range within a range" — the 4,400-4,600 band within the broader year-to-date range running from 4,800 down to 4,100. Indecisive, choppy. The slight softness in core inflation last month at least allows the debate on whether a peak is in place to play out with two-sided evidence. Used cars coming off the boil and very hot year-ago numbers from April-June 2021 could statistically help calm the inflation panic. Still, not much easing of Federal Reserve rate-hike expectations, given that the Fed seems intent on ramping short-term rates quickly toward neutral even if the data cools off. The question is how much of a slowdown might be needed to help the cause and whether that will include restraining labor demand later this year. The 10-year Treasury yield is slipping slightly from its run above the long-term trend line everyone has been watching. A breather makes sense given sharply negative sentiment toward bonds and overextended price action, but chart readers suggest an attempt toward 3% appears pretty likely given the momentum in place. We were there in 2018; we'll see. Professional investors remain wary and focused more on risk than reward potential. All else being equal, that's a positive, as low expectations are insulation against disappointment. All else is never equal, of course — many hurdles lie ahead — but overexcited investor positioning is not among them. Tuesday's Bank of America global fund manager survey shows depressed risk exposures reported by the big money. This is understandable, perhaps, given that this is the worst start to a year ever for the traditional 60/40 stock/bond portfolio. Diversification has not been a buffer, which reduces the capital available for dip-buying and reallocation toward cheapened assets. The good news: With the worst-ever start, mean-reversion favors some recovery in coming months either from the stock or bond side, or both. It's also worth noting the third week of April is among the strongest seasonally on the calendar, historically. Any relief for growth/tech? UBS is upgrading tech, saying it has quality/defensive/pricing advantages at this point in a cycle. It's true that "quality" stock screens disproportionately turn up tech and internet names. The question is whether valuations have been wrung out enough. So many charts in the growth universe look like this: a surge and then a sharp retracement that takes it merely back to where it stood at the onset of the pandemic. Nasdaq 100 forward price-earnings versus S & P 500: Market breadth is decent, 2:1 up:down volume, nothing stellar. Energy is bouncing hard after Monday, and the equal-weighted S & P is outperforming again (it's off just 5.3% YTD vs. nearly 8% for the market-cap-weighted index). Credit is firming, but spreads have been softer lately. VIX giving back most of Monday's pop after the CPI number. Still in a mini-uptrend, another choppy range but no serious stress implied.
Traders on the floor of the NYSE, March 2, 2022.
This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics.