(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.) A firm but noncommittal start to the week, the indexes continuing to hover just below record highs on selected mega-cap strength and constant rotation. Nvidia , after a few days of shallow downside chop, had a sturdy bid and accounts for most of the S & P 500 ‘s slim quarter-percent gain. Energy , last week’s comeback player, was off 2% on a supply-driven slide in crude prices. The so-called “dispersion trade” has been quite active since the traditionally weak seasonal stretch began in August. This features stocks moving their own way, mechanical shifts in flows among sectors, suppressing index-level volatility and keeping the market in equilibrium as investors await the next macro catalysts and earnings updates. Some quarter-end rebalancing out of stocks and into bonds has been expected and has perhaps been an overhang in recent days, given the sharp outperformance of equities over fixed-income paper since June 30 – shown here via the Vanguard Total Market ETF and the iShares Aggregate Bond ETF. Still, most of this activity has likely already occurred. Another technical influence is said to be the rolling off of sizable options exposures that have held the indexes in place through offsetting dealer hedging action. While never a true cause of a major move, such factors can cause ripples and open a window for somewhat wider, looser moves in weeks to come. The loud collective questioning of the AI boom and whether it was overshooting to place vast amounts of capital at risk seems to have hit a short-term peak last week. Morgan Stanley semiconductor analysts concede the prospect for eventual redundant buildouts and malinvestment, but today accentuated that OpenAI’s gargantuan plans for $350-400 billion in incremental spending over several years “literally was not in [earnings] estimates at all.” The brute force of this promised spending (with many asterisks about funding and power needs) can be enough to soothe bubble fears in the near term. Government shutdown likelihood not making much of a ripple, as everyone recites the well-understood history in which such episodes rarely undercut the economy or markets in a detectable way. Treasury’s “general account” cash stores have been replenished and the spend-down would be net additive for a time. Going without a jobs report Friday would not be ideal, but it comes as most acute stagflation fears have eased. Some talk that relatively light institutional positioning accounts for the resilient tape and minimal depth of pullbacks, along with universal expectation for a year-end ramp. That plus Wall Street talking itself into “Goldilocks” mode again (Fed doing “soft landing” cuts, economy possibly soon gaining pace) has kept sellers at bay. Hard to argue with, though it’s crucial to acknowledge that this is now a very popular take in a market that hasn’t had a proper shakeout in months.
