Unlikely this pullback is the Big One
(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.) There aren’t many reasons to believe this market pullback is the Big One, but might it become a bigger one? The setup entering the week opened the way to some retrenchment: The S & P 500 registered its most overbought reading in 14 months just as momentum was waning and market breadth was flagging. The rally had fed fully off the known positive catalysts of a Fed cutting rates in a steady economy, with the AI-investment theme running hot but losing its power to impress. Seasonal patterns suggested caution, with some supportive flows and options positions due to roll off. Still, the slippage in the indexes has so far been orderly and modest. While the “froth pockets” of speculative quantum-computing , alternative-power , AI-supply-chain and crypto-treasury companies reverse and bleed lower, the core big-cap complex is mostly churning and rotating. The S & P 500 is still down less than 1.5% from its peak, not even halfway to what would be the first 3% dip in five months. The selloff earlier also stopped short of the low set in the reflex Fed-day selloff during Chair Powell’s press conference. The 6500 level remains logical and tidy as a potential spot to retest if the dip-buyers permit it. Among the aggressive fringe parts of the market now being fled, the digital-asset-treasury stocks stand out. Pure financial engineering and depending openly on “greater-fool” logic. The pioneer of the genre, Strategy Inc. , has now been dead money since just after the election, when the stock went vertical on a burst of enthusiasm for the pro-crypto administration. The company is still valued at a premium to its $70 billion in Bitcoin holdings, with a market value of $85 billion and enterprise value (including net debt) of $100 billion. The sizable upward revision to second-quarter GDP estimates driven by better consumer spending is helping to lift Treasury yields and reduce expectations for how many more times the Fed might cut rates this year. Fedspeak has, on balance, also been pretty cautious on committing to a series of cuts in the past week or so. The 10-year is at a post-Fed high, looking like a double bottom, though still in a relatively benign range. Some anxiety around PCE inflation Friday though the Street seems to have a decent fix on it after the predecessor data inputs were fed in (up 2.7% year over year headline, up 2.9% core). Market breadth is weak but not a washout, around three stocks down for every stock rising. Apple is trying to play hero ball, ramping in the afternoon and in effect working to rescue the S & P 500. VIX , near 17, is noticing the chop and shows some traders prepping for more, but its rise has been contained by the multiple intraday index rallies off a low.
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