Market gears, rotation slip a bit
(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 gears are slipping a bit in the market’s pro-cyclical rotation, leaving the key indexes sputtering near levels reached almost eight weeks ago. For weeks, “real-economy” stocks have been gaining favor, largely offsetting pressure on AI-dependent Big Tech, as investors positioned for a more permissive Fed and an expected early-2026 upturn in the economic pace. This has meant the Big Five banks over the Magnificent Seven tech leaders, small caps over large , value closing the gap with growth . The migration of money along these paths has been enough to hold the S & P 500 in its upper range, within a few percent of a record high. Yet the index has sagged to the bottom of this two-month range and is again tussling with its 50-day moving average. This shift toward economically sensitive areas has not been called off, for sure. The twitchy, suggestible tape managed to avert deeper losses a couple times intraday, as small bounces in bitcoin earlier and then headlines that President Trump might consider Fed governor Waller as the next Fed chair caused sellers to back away. Still, this morning’s data showing a tick higher in the unemployment rate and generally sluggish labor demand has tested the cyclical optimism a bit. And it raises the question of whether the market has paid up heavily in advance for a reacceleration that is supposed to occur in somewhat squishy footing. The Bank of America global fund manager survey can always be relied on to help explain how the market has been acting, and the new one shows record-low cash holdings among professional investors , a sign that as a group they positioned aggressively for the promised year-end ramp in the indexes. They also now believe companies are investing too heavily in new capacity, reflecting the “capex vigilantes” selling off some of the heaviest spenders in AI infrastructure ( CoreWeave , Oracle ). Combined with the rather uniformly upbeat year-ahead projections by Wall Street strategists for S & P 500 returns, the fund managers’ posture suggests the crowd is expecting plenty for 2026 and could be difficult to impress. This churning action in the indexes could be partly related to the impending December options expiration on Friday, which can often exert a gravitational pull around certain price levels and cause erratic price action within a range. Next week we’ll have markets freed from such influence, with fewer key data releases and thinner pre-holiday activity. Such conditions can create air pockets, in either direction. Will it be seen as a chance to buy the mega-cap tech leaders on sale, or to shed risk further? The weakness in oil prices has accelerated , with prices reaching early-2021 levels, as persistent supply and the prospect of Ukraine-Russia peace progress interacts with tepid demand. At some level, oil in freefall begins to send an adverse economic signal, though it’s not clear that we’re there yet. It is exerting some helpful downward pressure on market-based inflation pricing, which should accrue toward a more dovish Fed.
<
