This is the daily notebook of Mike Santoli, CNBC's senior markets commentator, with ideas about trends, stocks and market statistics. More grist for the "growth scare" as further softening in manufacturing momentum drains economic confidence and bolsters the migration toward defensive assets. The main questions now are whether the markets are over-anticipating or underappreciate the degree of weakness ahead, and whether the Federal Reserve might start taking back some of its verbal tightening efforts – which to date have been the main method of attacking inflation. It seems too soon for a clear answer on either, but we are now marinating in macro anxiety so not-great data would seem to be getting baked in on some level. A weak ISM manufacturing report featuring contraction in new orders and employment thwarted a morning rally attempt in stocks and sent Treasury bonds ripping higher, dragging the 10-year yield below 2.9% from nearly 3.5% two weeks ago. Part of this seemed like a positioning shock/short covering after the worst half-year for bond returns in generations, but mainly this is money seeking refuge from a hostile-seeming backdrop of hawkish Fed and a faltering expansion. Homebuilders have a bid, though, and wholesale gasoline prices keep falling, silver linings to the admittedly thick clouds. Stocks backed off but so far are more drowsy than devastated, edging lower led by semis and energy wile holding above their week-to-date lows. There's some mean-reversion action with lots of stocks outperforming following a bad end to a terrible quarter. A 20.6% drop in the first half of a year is a jarring rate of loss and in the small sample of instances with 15%+ losses from Jan-June in history, second-half returns have been positive each time. But this isn't the case for all six-month steep declines. Nearly all the pattern work shows that the current levels of depressed sentiment, defensive positioning and persistent price declines generally coincide with the latter parts of a decline — unless this is more like one of the severe, recession-haunted phases such as those beginning in 2000 and 2007. There are good reasons to doubt that any economic unwind needs to be all that severe — tight labor markets, healthier consumer/corporate balance sheets, among others — but we can't say for sure at this stage. Another "this is good support unless were back in 2000 or 2007 indicator" is the long-term S & P 500 chart with its three-year moving average. The index has either bounced off it or made a very brief stab below it before rebounding except in the deepest of bear markets. What's priced in? Softening credit markets are keeping investors on edge and sending a message of growing macro concern without yet flashing a desperate alert. Risk spreads on the corporate-bond index are above 160 basis points, similar to the late-2018 peak but not up to the early 2016 global growth panic featuring an oil bust. If this gets out of hand, it would get the Fed's attention, but presumably not change its stance before at least a bit more benign inflation data. What's priced in #2? Consumer cyclicals have been cast aside for valid reason — housing market retrenchment, real spending pinched and a big hangover for goods purchases. Valuations reflect a good bit of this, with the equal-weight consumer discretionary sector down from 28x forward earnings in spring 2021 to below 14 now, while staples valuations have risen to a decent premium. This is directionally reassuring but impossible to call a full accounting of what weakness might lie ahead. What's priced in #3? Micron is down less than 5% on a resounding revenue guidance cut after the stock had already shed more than 40%. Other chip makers are also getting clipped, but this is likely a routine that will repeat quite a bit in coming weeks. Market breadth is not bad, about 50-50 up/down volume. VIX is buckling, with the indexes in a narrow range and a three-day weekend ahead. No one is comfortable with a VIX at 27 – not those wanting a sign of calm and confidence nor those wishing for a crescendo of panic. But we've been in this zone for a while, featuring slow grinds lower with periods of traction. The S & P 500 remains 4% above its intraday low from mid-June, let's remember.