Speculative juices start to flow back
(These are the market notes on today’s action by Mike Santoli, CNBC’s Senior Markets Commentator.) Nearly two weeks after the market’s 5% pullback bottomed, with the S & P 500 hovering calmly half a percent from its former peak, the speculative juices are starting to flow back into the spicier corners of the market. After a 5% rebound rally, the benchmark is hesitating a bit around 6850, comfortably near the upper end of a two-month range but perhaps marking some time to gather itself ahead of next week’s Fed meeting. For the prior couple of days, the key feature of the market below the surface was the way the “early cycle/Fed rate cut/economic reacceleration” playbook was being executed. Consumer lenders, transports, specialty retail, some commodity groups were being reflated. An accurate read on the impending emergence from a soft patch into a tax-stimulus-driven upturn in early 2026? Or just a reflex mean-reversion trade in some laggard sectors at a time when the AI theme has become more fragmented and treacherous? Thursday, the lower-quality/higher-beta favorites were on the run. The Van Eck Social Sentiment ETF (BUZZ), full of meme-like stocks, was up more than 2% and accelerating out of its downturn relative to sleepy low-volatility names. I’ve noted a few times that the aggressive retail-trader cohort did not seem to lead the buying of the late-November market dip, held back by deep losses in crypto. Now with Bitcoin holding some 8% above the recent low and the Volatility Index receding to a “normal” reading near 16, the speculative risk-seekers are coming back. Benign jobless-claims data Thursday morning slightly mitigated the poor ADP employment report Wednesday , though it keeps in place a picture of a stalled/low-metabolism labor market that bolsters the doves’ case in next week’s Fed meeting. Still, the bond market is not positioned for radical moves from there. Maybe 2-3 more cuts next year, no real uptick in inflation expectations. The calendar-based presumed upward bias is tough to fight, even if the odds favor a stronger second half of December than a giddy start. Sell-side sentiment is quite tightly clustered on the optimistic side of the field. The average S & P 500 target is settling around 7600, up a healthy 11% from here. The consensus is pretty comfortable with the S & P 500 mostly holding its elevated P/E, with 13%-14% earnings growth, fat profit margins and a boost to the underlying economy allowing cyclical stocks to play more catch up. It’s all plausible, but this kind of upbeat crowd belief can usher in a potential overshoot in bullishness early in a new year. Something quite like this happened a year ago, in late 2024. The initial targets were appropriately bullish, but the first-quarter tariff panic drove most strategists to downscale their forecasts near the low.
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