Stocks regain footing after shakeout
(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.) The market quickly regained its footing, bidding to make Tuesday’s tumble appear a one-day shakeout of the most crowded, over-stretched and aggressive positions. The 1.2% S & P 500 decline Tuesday — driven largely by high-beta semiconductor and AI-levered tech stocks — never quite broke containment. For two days straight the S & P bounced off the 6760-ish threshold, which (probably not coincidentally) was the level that capped the early-October rally and from which the index tumbled in the prior sharp gut check on Oct. 10. The key stress points that pressured the tape Tuesday have firmed up, at least tentatively. The liquidity beacon, Bitcoin , lifted more than 2% after sustaining a 20% peak-to-trough pullback. Meta Platforms halted its post-earnings skid. AMD and the rest of the semis are back in beast mode. And consumer cyclicals – airlines up almost 6%, regional banks relaxing higher, even the beleaguered restaurant group up on not-so-great earnings – are trying to get traction after some conspicuous underperformance. A few good excuses for less-dour cyclical tone: ADP private payrolls exceeded forecasts, ISM Services better than expected, glimmers of hope on ending the government shutdown and Supreme Court arguments causing the markets to bet more confidently that President Trump’s “emergency” tariffs might be disallowed. Here we see the flipside of the extreme narrowness of the recent rally phase: Because non-AI sectors have been soft for a while, some were primed to bounce rather than be toppled by the profit-taking spasm that hit the Mag7 and related glamor names. The same mix of better-than-feared macroeconomic indicators that have cyclicals bouncing are driving Treasury yields higher . Some sense that if tariffs are struck down there will be more Treasury issuance/wider deficit to repay companies that paid the levies. Either way, this continues a recent pattern in which stock indexes have been positively correlated with Treasury yields, as shown here. This dynamic means equities are more sensitive to concerns over economic growth than inflation (when the correlation has been negative was in the worst of the inflation battle from 2021-2023.) The relief bounce in stocks is generally constructive, with upside volume some 70% of the total, though perhaps not an all-clear signal. At this point, the S & P has recovered about two-thirds of Tuesday’s drop, which represented just the 8th 1% daily decline over the prior 145 trading days and took the index 2% below its record high — hardly a comprehensive flush. The consumer sector still has a bit to prove, “AI bubble” chatter is unlikely to go away and the December Fed rate-cut call remains unresolved. All worth watching, though perhaps with seasonal factors favorable, earnings clocking in near a 12% annual growth pace and credit markets showing little stress, a modest wobble is enough to skim away some froth and revert the market to its benign trend.
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