Apple shines bright even as the rest of the market enters a pullback zone

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This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. Stocks are still in a “routine pullback” zone after a strong ramp off the June lows and unwinding some overbought conditions. But a reversal in some key drivers of the rebound is testing the tape’s fortitude. Treasury yields and the U.S. dollar index had settled back on the softer U.S. consumer price index numbers and hopes for an end of Federal Reserve tightening on the horizon. Yields and the dollar have run back toward recent highs, in part on very hot European inflation data that has sent bond yields skyward there. The S & P 500 is still a good 1% above the notable potential support level that’s been noted here all week: the early-June highs (and former March lows) near 4,170. Options expiration is likely widening out the daily range in many stocks and the indexes but not a strong directional driver, by most accounts. The rise in the dollar shows some of the loosening of financial conditions that occurred in recent weeks has been partially retightened, as Fed officials have stuck with their standing line about it being premature to waver in the inflation fight. Their comments, though, lose a bit of their bite because this is exactly what they must say right now whether they privately hope/expect the job could mostly be done by year end with short-term rates between 3% to 3.5%. AAPL has been a remarkable and somewhat inscrutable source of strength. Both popular with the most resolute bullish investors and yet with defensive attributes, the stock’s performance versus the broad market and the rest of megacap growth has stretched historical extremes and placed it at a record 7.3% weighting in the S & P 500. Some softening today but still not underperforming. How much more can it do? Big picture: Stocks rallied hard with the kind of momentum/breadth display that has tended to mean a good low is in, raced up to the S & P 500’s 200-day average and stopped on a dime, is now pulling back, and investors are looking to withhold further big bets ahead of the Fed’s Jackson Hole message next week. (A similar momentum burst higher in the 2011 growth/credit scare rolled over to a quick secondary correction before finding footing above the prior lows, for what that’s worth.) Market breadth quite weak today, clear “risk-off” tone but still quite orderly. VIX still below 21, with stocks not far off the highs and a summer weekend ahead. Credit softer but short of true stressed conditions.

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