Consumer sentiment 'cratered' in Friday's report. However that news failed to be be initially received constructively by the market as 'bad news is good news', such as the last couple similar data-points have suggested. Later S&P recovered. So it's not just that the Fed won't be incentivized to move to lower rates sooner (a mixed view); but, being realistic, it's up days 8 days basically for S&P (one goose-egg), thus time or past time for at least some sort of rest. Of course it will manage to roll-around in-place pending Wednesday's CPI; of course as well providing no exogenous shocks of another military weekend.

Upside continuity without rest is unrealistic, even as breadth expands, and so under-fills some of the 'fluff' coming out of a lot of mega-cap market leaders.

As to data, the decline in sentiment was broad across age, income, education groups, and also reflected growing concerns about high interest rates. While the labor market has driven economic growth over the last year, the downbeat assessment highlighted in the report adds to evidence of a slowdown. Fed?

Moreover, U Mich's measure of buying conditions for durable goods, some of which are financed, also decreased to a one-year low. And finally, consumers’ perception of their financial situation, plus all short & long economic outlooks, decreased this month. That means consumers expect the pain to continue, as expectations for interest rates deteriorated considerably into May; given just a quarter of surveyed consumers expect interest rates to fall in the year ahead, whereas last month 32% were looking for lower interest rates.

In the process, yields have been stable-to-firm, and a more buoyant long-end is notable. What's leading the way is shorter maturities on the yield-curve; so it all comes back to the Fed or muddling statements from several Fed-heads. I can't frame it better; that's the backdrop as market near-neutrality reinforces.

Market X-ray: this market's 'resilient' if anything; especially for usually choppy May even with better underlying sentiment.

There has been broadening-out; and only to limited extents because of 'real' stamina in the economy. We're approaching 'the Summer from hell' hurricane season (with the tornadoes tragically tearing-up some of my home territory in the Midwest) and just anticipate that's going to have an impact on a number of factors. The least contemplated might be whether Florida coastal properties will be peaking in price or if that's still pending. No question upkeep is higher; including even where I am away from the coast, so at some point discourages buyers without deep concessions; or meaningful tax reform (as would merely drive insurers from the State). And in this climate-era, almost everyone has a flood risk it seems, even if they are not in a flood plain.

So we spent a couple weeks holding S&P in a high range; catching shorts as I noted we would; and broadening-out beyond that to maintain reasonably-wide traction. Now S&P is barely 1% from a record high, to the chagrin of skeptics.

Mega-cap leadership is about 8-10 names that dominate this Index, and does not look cheap if you try to assess their valuation. But it's the lag of most other stocks that allows technicals to have advanced from a neutral assessment; at the same time of course mega-caps alone would look overbought all along.

'All stocks are technology stocks' is the refrain you might here now; as every industry embraces more technology (and Ai in most but not all cases).. so that is the argument some make to suggest this is normal. Yes, be a bit skeptical in this regard, but it's an election year, the consumers are vacillating; and you've got a Fed that ought to get more pressure to ease... although in a sense they already have started (balance sheet), which might have contributed as well.

The market has done the most, if not more, than we could have hoped for in May. I don't know if S&P will still be put back on its heels a bit; so we can't just expect continuity without a respite, but so far the behavior is constructive with respect to the longer view.

Bottom line: the extreme 'under-performing' areas of the market were ripe for a rebound, and that's what we had; a broadening to counteract bifurcation.

For now it's sort of 'neutral' in many aspects, with macro impacts next week. If you get signs of slowing inflation rates (you might given car prices slipping as well as some rent slippage; more so than food costs) .. that will help stocks.

You're going to get a couple sub-3% CPI readings and that will help lower the pace of inflation (not really lower prices; just lower increases); but that will be enough for some elements to extol the virtues of Fed policy and justification in their minds for a Fed rate cut, justified or not. Not trying to be political; it's just the backdrop that is keeping this market buoyant.

Notice VIX has made it to levels that might interest speculators... but again it's almost a hit-and-run kind of play. Anyway first we see more resilience or may even get a relief rally and Oil-dip, if the Cairo meeting lands a ceasefire.

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