This is the daily notebook of Mike Santoli, senior market commentator at CNBC, with ideas on trends, stocks and market stats. Global growth gloom with a dash of Covid caution settled on US morning trading, costing the S&P 500 about 1% of its 7% three-week rally, but otherwise offering little concrete evidence about the fate of the latest rebound attempt. China’s latest Macau lockdown and tighter restrictions go hand in hand with a subplot of a stealth wave around the world to squeeze risk appetite, at least for now. Bond yields are falling, US dollar tearing, whether the Federal Reserve can and will ease before the recession threat mounts are the overlays. Yawn if you’ve heard this before, but the S&P 500 has done nothing to reverse the six-month downtrend. However, it holds above both early-month lows and May’s intraday lows, so for now the main conclusion is inconclusive. We have seen a pattern of early weakness and afternoon firmness in stocks over the past week. Today could be a little test of whether this is a trend with something behind it other than cash for the new quarter replenishing depleted stock allocations. The market is already well advanced in pricing in some serious risk to the expansion, as evidenced by the performance of Goldman Sachs’ Cyclicals vs. Defensives’. Note that the defensive group has significant tech exposure, the profitable taste of tech is also described as ‘quality’. Although the Big Tech snail hurts today, it is not helping with AAPL and others are returning some recent gains. As noted, the appreciation of the dollar against every other currency has become quite extreme in degree and speed. It’s a pressure point on corporate earnings and growth in the US, but it also provides some relief by helping to support the Fed’s desired goals of curbing price inflation and improving financial conditions. US Dollar Index here over the past decade. Sure, it’s getting overbought, but that’s also a sign of a strong underlying trend. There is sometimes a simplistic view that dollar headwinds make smaller stocks a better bet, as there are fewer trade-dependent multinationals to be found in small-cap indices. However, this usually doesn’t allay concerns about a slowing economy and declining liquidity. Still, the discount of small versus large stocks has become quite extreme, for those willing to bet that the laws of mean-reversion will remain in effect. Market breadth today is quite weak on NYSE, slightly better on Nasdaq. VIX up a small amount and still in the 26-27 range. It is on alert but shows no real rush for downside protection given the abrasive nature of the decline in recent months.