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S&P 500 tests the low end of its recent range as Wall Street projects bleak market outlook

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This is the daily notebook from CNBC senior market commentator Mike Santoli, with views on trends, stocks, and market data. It’s another turn around the track, with investors believing that the Federal Reserve will hold onto the economy for longer and companies can achieve any further growth. Tight financial conditions and increasing volatility in bonds and currencies are reducing risk appetite. So far, this means that the S&P 500 is testing the lower end of its June-July range. The bounce from the mid-June lows was pretty steep and didn’t come close to turning the broader trend, but for now it rules out a sloppy, twitching tape. Could this eventually prove to be a base phase, perhaps with a deep retest of the month-old low above 3,600? Sure, but it needs to be proven. Large growth indices are showing heavy some traction, AAPL in particular – often life raft hanging in a storm with most people. Nothing to get too excited about yet, but the Nasdaq 100 is improving a bot relative to the broader S&P 500, possibly a matter of Big Growth’s defensive/capitalizing qualities that itself as a struggle of cyclical sectors. and long-term yields remain below them. recent high. Many strategists/analysts are running some bleak scenarios this week through their goals and ratings, marketing their models to mood. Bank of America left the S&P 500 year-end view at 3,600, with Goldman channeling the bearish case to a low of 3,000. The 3,500 field has long been a focal point for those looking for a plausible negative destination for some satisfying story line. It is right in between the March 2020 low and the January 2022 peak. It is also about where the index’s 1,000-day (200-week) moving average sits, often supporting in poorly corrected/cyclical bear markets. The fact that Fed Governor Christopher Waller tightened the market slightly by reducing the opportunity for a rise of 100 basis points in two weeks shows what kind of play it has become. The market wants to see a move toward “neutral” at rates through and beyond this sprint. The Fed says it needs to see data support over several months. Meanwhile, the dollar screams higher, commodities crackdown and market-based inflation measures are far below, raising the possibility of a financial crash, while the Fed appears to be chasing lagging indicators. The bull case for riskier assets is now 75bp in July and then there is a “wait and see” period of about two months until the next meeting. JPM and MS haven’t done well, are relying on M&A related loans and need to build capital for rainy days. Banks bode well for the tension between “very good” levels of current economic activity and consumer financial cushion against increasingly slow-forward indicators and a pinched outlook. JPM valuation at 1.25 times book value. It was down here in early 2020, but like 1x book around “dimon bottom” in the stock in 2016. Bank earnings season is often a sight in terms of reactions to the numbers, so watch the boom as other giants report. The sentiment and position are still quite cautious/fearful. Appropriately, one might say, looking at the strength of the downtrend and the macro stress. But it’s better to be happy than everyone else and take maximum risk when things go bad. The National Association of Active Investment Managers’ equity exposure is hitting record-lean levels. Market breadth is fairly weak, with a nearly 90% drop on the NYSE on the day, slightly better on the Nasdaq. Credit markets are weak with dollar rally/bearish buzz/JPM bridge-loan write-down weighing on the market. Again, not in a desperate/crisis state and a bit less stressed than the junk debt until recently, but was a pressure point. VIX a small amount. As long as the S&P is above the low level and Megacaps is bidding, not very impressive.

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