This is the daily notebook of Mike Santoli, senior market commentator at CNBC, with ideas on trends, stocks and market stats. Stocks continue to feed on the negative investor sentiment that has built up, a lack of negative corporate news from conferences and some relief from macroeconomic headwinds in bond and currency markets. The net effect has rallied in the S&P 500 to the bottom of its range on “Jackson Hole Friday,” just above the midpoint of what is actually a tight four-month trading range. It appears that the market has moved back into a more neutral spot ahead of Tuesday’s ensuing CPI release. Market resilience reflects that real-time economic indicators hold up (map spending, New York Federal Reserve weekly activity index, ISM Services), better indications of inflation and an aggressive but “more of the same” message from a barrage of Fed speakers — entering the pre-meeting blackout period after today. The European Central Bank’s rate hike and base consolidation have eased the US dollar, although the 2-year yield is back above 3.5% after the Fed silenced the need for interest rates to curb demand this morning. It still appears that a major new macro shock is needed for stocks to break through quickly to/through the June lows, with oversold positioning/flow/sentiment extremes developing over the past week with the S&P well above the June lows. valley levels. To some extent, the tape has been stress-tested with continued “hard love” from the Fed, falling (but not collapsing) earnings forecasts and the usual “scary September” talk. That said, the simplistic view that the Fed is slowing hard, the global economy is struggling in a more disorderly way, the general market trend is lower and stocks aren’t cheap, probably the index will cover from here – with post-September decline phase coming later. in the month is often awkward, rather than what is usually relief at the end of a midterm election year. Some nuance on the valuation front – the excesses remain clustered in the swath of mostly large, primarily growth S&P stocks, with the bottom of the index and even the median at less demanding valuations. This has to do with why the S&P 500 of the same weight has consistently outperformed the standard market cap weighted version this year. Market breadth is very strong, with volume up 90% and more new highs than NYSE lows. The VIX slides below 23, confirming the stability of the trading range and cementing the relief rally, even if it says nothing about how much higher it can carry.
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