(These are the market notes on today's action by Mike Santoli, CNBC's Senior Markets Commentator. See today's video update from Mike above.) An upbeat but not-quite-euphoric market response to the Fed cutting rates into a firm economy , while projecting at least a bit more rate relief to come. While all indexes are clicking to record highs, the benchmark S & P 500 was off its highs and not far above Wednesday's peak, while the high-torque rotation into textbook rate-cut beneficiaries ( small-caps , financials and lower-quality stocks) kickEDs in. Market breadth is fine but nothing special, the tape having maneuvered itself into roughly the correct spot by the time the expected quarter-point cut came. Chances are the rotation would've been even more stark to the disadvantage of the overbought Nasdaq leaders if not for the headline-driven pops in Nvidia and Intel . With the FOMC lifting its median GDP growth and inflation projections while anticipating two more cuts this year, the message is, on balance, a dovish one. But given that no cut for September was priced in as recently as six weeks ago, circumstances and the complexion of the data can change enough to alter that rate path pretty easily. Plenty of calls in recent days for a "sell-the-news" response to the Fed have been redeemed only by the bond market. Treasury yields up notably, the 10-year back at 4.1% after testing a 3-handle but failing to spend more than a few ticks under 4%. Equities are taking it in stride mostly because the absolute yield level is unthreatening, not enough of a pop to signal that the Fed made a policy error by trimming overnight rates. The stock market will surely not get antsy about inflation above 2.5% unless and until the Treasury market does; so far this is not the case. The small-cap move perhaps seems a bit forced, but the Russell 2000 has finally poked above its late-2021 high, helped both by the standard belief that less-profitable and more-indebted small companies have more to gain from soft-landing rate cuts. But it's also exploiting a deeply depressed starting point. Here's the Russell 2000 relative to the Nasdaq 100 since the very start of the 1990s boom 30 years ago. This is the inverse of the bubble, and small-caps only made that massive comeback in relative terms because the Nasdaq crashed by 75% over two-and-a-half years beginning in March 2000. Aside from the macro rationale, the Russell 2000 has plenty of high-velocity speculative names, a quadrant of the market that's flying today. The BUZZ meme-stock and the QTUM quantum-computing ETFs are up 3%, as are Robinhood shares. JP Morgan has joined the conversation about whether some version of a rerun of the late-'90s momentum crescendo could be ahead, which it says would imply a 47% further appreciation in equities . This is based on global investors ramping their equity allocations to the 2000 peak. Nothing says the market is due for another such manic episode, which itself had only been closely approximated by the binge that culminated 70 years earlier. The top market-cap contributors today are of higher financial quality than they were 25 years ago, and the supply of new IPOs today is not nearly as heavy or as speculative as during that bubble. But it's at least instructive that market handicappers need to lean on the late-'90s precedent to sketch out a case for aggressive multi-year upside from here. This helps explain why esteemed hedge-fund veteran David Tepper of Appaloosa this morning on Squawk Box spoke of staying involved in stocks, declining to fight the Fed and respecting the AI momentum, even as he feels "miserable" about the levels of valuations one must pay today to participate. This is not an uncommon sentiment among professional investors, which in the near term could mean that any wobble we get as overbought conditions take hold and seasonal factors remain challenging would likely find buyers, at least initially.
