Wall Street holds its breath – and rally – as a major payroll report looms
This is the daily notebook from CNBC senior market commentator Mike Santoli, with thoughts on trends, stocks, and market data. The market is in a listless drift near the top end of the trading range as Wall Street awaits a jobs numbers and tries to determine whether this rally differs from the earlier fleeting surge of the 2022 bear market. The S&P 500 has been hesitating just below its early June high of 4,177, followed by the halfway mark of an entire peak-to-trough decline near 4,230. So there are some upside tests, as soon as some parts of the market start to buy a bit higher in the short term. There is much talk from the sell-side trading desk that the 14% S&P 500 rally has mostly been a positional shock – an overwhelmingly pure short hedge-fund community, excessive bearish sentiment and high liquidity levels in mid-June generated a powerful snapback. did . True, sure. All rebound rallies go the same way – ruin and durable rallies alike. Yet that doesn’t mean the rally was purely about mechanical/flow factors. The S&P is lower since mid-June, crude is down 20%, gasoline prices have fallen every day and the 10-year Treasury yield has fallen by more than half a percentage point. Meanwhile, the macro data leans a bit more toward a “soft-ish” landing than a “rapid slide into a recession.” Remember that sustained increases in gasoline prices and the Federal Reserve’s plan to headline inflation and consumer expectations of its policy anchoring — which are themselves proxies for gas prices — were the main drivers of the market’s descent into mid-June. Some reversals in gasoline and yields have fed the “peak fed hawkishness” idea with some justification. Jim Paulson of The Leuthold Group notes the risk-seeking character of the current rally, a basket of “aggressive” areas and strategies relative to “defensive” plays, which tend to create runs that precede significant market lows. Looks like a ramp. Notable, perhaps, is that last year’s upside extremes in offense-on-defense were significantly more prominent than previous peaks, but it’s still something that makes this rally a little different from previous ones. Weekly jobless claims saw another uptick and the four-week average is trending higher, in line with rising recession risks, but not yet at absolute levels that indicate a severe weakening of the labor market . The jobs numbers are expected to still look healthy on Friday. It’s not clear whether the market wants a much stronger print, given that the Fed people use the underlying economic strength as a cover story for their perceived resolution to get rates a good deal higher and more in the coming months. Don’t consider it easy. Yes, Fed speakers seem like the markets are ignoring their insistence that no dovish pivot is in sight, but we’re pretty close to neutral and well beyond the next Fed meeting and the S&P 500 only back in two has come. – month high. To me, it’s not like investors have neglected growth. But no one is talking about 4% to 6% lower rates now and key indicators of inflation are off to a boil, so some relaxation in equities makes sense. The National Association of Active Investment Managers survey found strategic active managers lift their equity allocation to rock-bottom extremes, in line with market action, and place this exposure index around the low of neutral. The breadth of the market is fairly evenly mixed. VIX a small amount around 22. It’s likely the jobs report will keep it from chattering too much from here, but it could come in a pocket of air once the print and markets open after early Friday.
