this is the daily notebook of mike santoli cnbcs senior markets commentator with ideas about trends stocks and market statistics stocks try to shake off a mild postoptionsexpiration morning hangover to gain a bit of traction but the tape remains wary of bond yields hitting new highs ahead of an expected hawkish federal reserve decision last weeks decline after the hot consumer price index report pushed off the perceived moment of a fed truce took the s  p 500 below the 3900 area bulls were hoping would hold this cracked the little uptrend from the midjune low it makes sense that it brings a potential retest into view nearbelow 3650 but nothing is preordained the index now hovering just above 3850 – the down 20 level from the peak – and its starting to generate oversold conditions roughly similar though not quite as extreme as what was witnessed at the yeartodate lows the s  p 500 with dates of fed decisions circled shows that when the index has been on a sharp downside run into the federal open market committee meeting it has led to bounces soon thereafter for what thats worth the 2year treasury yield pushing 4 is rippling across asset classes reflecting the combined inflation backdrop and anticipated fed response some equityvaluation models tied strictly to this yield suggest the s  p 500 forward priceearnings should be more like 13x14x rather than the current 165x its a crude instrument for gauging fair value but has largely been in tune with valuation trends in recent years worth noting the equalweight s  p is about there 142x forecast earnings with all the apparent overvaluation still clustered in the hugecap growth stocks represented by the nasdaq 100 still trading at 21x the very high end of its prepandemic range the fed on wednesday will clearly want to continue pressing its case that whenever shortterm rates get to their destination 4 plus or minus a bit they will stay there for some prolonged period its not clear to me that this is at odds with current bondmarket pricing so for stocks its really all about the lagged effect of the tightening to date on the real economy and earnings theres general agreement out there that 2023 consensus for profits is too high though far from clear that a typical recessionlinked 20 drop is in the cards so many crosscurrents from high nominal gross domestic product growth to a mix of lesscyclical companies dominating the index while on the negative side many companies  fdx  much of consumer discretionary clearly overearned in the pandemic bustboom phase some glimmers of outperformance in financials and consumer discretionary are visible in the quartertodate charts with both sectors holding well above their june lows worth watching if not outright trusting the defensiveness of tactical investors is unsurprising given the fed tightening without much concern about the economic toll and the fact that its late september lets see if the same folks selling into the weakness will be ready to spin bullish in a month as the ned davis research cycle composite would suggest combines the annual electoral and 10year cycles market breadth is mixedtosoft credit markets continue to hang in well betraying little macro stress for now vix hovering in the mid20s i wouldnt expect downside through fed meeting but kind of a nonsignal in this zone