(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 powerful riptide rotation pulled the megacap growth leaders under while allowing the average stock to churn higher. So many investors root for a "broader market," but this could be what one looks like: big-cap indexes stuck or wobbly, erratic action below the surface and higher risk of market accidents. Two days' worth of pressure on Meta Platforms ' shares on reports that the social media giant is retooling its artificial intelligence efforts was among the apparent triggers for the move. However, this follows another round of investors' complaints about the extreme top-heaviness of the market and its dependence on the AI trade. The Nasdaq 100 was off more than 1%, as was the overall momentum-stock category. The equal-weighted S & P 500 held up better as consumer-cyclical and industrial stocks hang tough. The opposing currents have pulled the S & P 500 down, finally cracking below the level from last Tuesday's close following the consumer inflation report . I've noted that traders have been attempting to defend this level over the past four days. The atmospheric factors allowing for this kind of whippy action have been well known: The S & P 500 and Nasdaq 100 were back near the upper end of their multi-year valuation range. The largest seven stocks had risen to a collective 34% weighting in the S & P 500, above the late-'90s peak concentration. Second-quarter earnings blasted past forecasts, but the stock reactions were stingy, implying good news was largely priced in to equities. Speculative aggression has been running high — meme stocks, crypto-linked stocks, initial public offerings, the Ark Innovation ETF (ARKK) — inviting a shakeout. The action resembles prior momentum reversals from July 2024 (after which the S & P 500 was capped/choppy for two months) and early 2025 (Tuesday marks six months since the prior S & P 500 peak on Feb. 19, before the tariff panic). The short-term 20-day moving average and the trend line connecting the lows of the past three months are shown as potential parameters of a possible benign pullback from here. A return to the old February high would be about a 5% dip from the recent high. The action comes, of course, after the S & P 500 has ramped more than 30% off its April low, into a tougher seasonal period, with the Street largely idling ahead of Federal Reserve Chair Jerome Powell's speech at the central bank's annual symposium in Jackson Hole, Wyo. on Friday. Presumably, Powell will want to preserve all options for the next rate move, given important inflation and payroll data to come in the four weeks until the next Fed meeting. The market has been resolute in holding to a view that there will be a rate cut in September so far. Treasury yields were subdued on Tuesday.
