(These are market notes from CNBC senior market commentator Mike Santori on today’s moves.) Roughly two weeks after the market’s 5% decline bottomed out, the S&P 500 index is quietly trading at 0.5% from its previous high, and speculators are starting to return to the more exciting parts of the market. After a 5% rally, the benchmark is a bit hesitant around 6850, comfortably near the top of its two-month range, but perhaps indicating time to settle ahead of next week’s Fed meeting. The main feature of the market behind the scenes over the past few days has been how the “early cycle/Feed rate cut/reaccelerate the economy” strategy is being implemented. Consumer finance, transportation, specialty retail and some product groups experienced reflation. Are we accurately reading the impending arrival of a soft patch to tax-stimulus turnaround in early 2026? Or is this just a reflexive mean-reverting trade in some laggard sectors as the AI theme becomes more fragmented and riskier? On Thursday, low-quality/high-beta favorites were in hot pursuit. The Van Eck Social Sentiment ETF (BUZZ), which includes a large number of meme-like stocks, is up more than 2%, accelerating its exit from the decline compared to sleeper names with lower volatility. I have noted several times that the aggressive retail trader population did not appear to be leading the buys of the market sell-off in late November, restrained by significant losses in cryptocurrencies. Bitcoin is now about 8% above its recent lows and the volatility index has retreated to a “normal” value around 16, which is bringing speculative risk seekers back. Thursday morning’s positive jobless claims numbers made Wednesday’s ADP jobs report a little less bad, but the stagnant/sluggish labor market picture that will support the dovish case at next week’s Fed meeting remains. Still, the bond market isn’t poised to move too radically from there. There will probably be two or three more rate cuts next year, but they won’t materially increase inflation expectations. Even if the second half of December is likely to be better than a heady start, it’s hard to fight the upward bias in calendar-based estimates. Sell-side sentiment is very much on the optimistic side of the sector. The average target for the S&P 500 has settled around 7,600, and is up 11% from here. The consensus is pretty happy with the S&P 500 maintaining a mostly high P/E ratio, with 13%-14% earnings growth, strong profit margins, and a stronger underlying economy helping cyclical stocks catch up even further. That’s all plausible, but this kind of crowd-positive belief could trigger a possible bullish overshoot early in the new year. Something exactly similar to this happened a year ago, in the second half of 2024. Initial targets were suitably bullish, but the tariff panic in the first quarter caused most strategists to lower their forecasts to near the lows.
