Stocks have now given up half of their summer rally. Watch these levels next

This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. Stocks are under a bit more pressure from a wave of good economic news, brighter consumer moods and a firmer labor market that builds expectations on how much tighter the Federal Reserve will choose to become. The S & P 500 slid below a few widely viewed thresholds — the 4,000 level, the 50-day average and the halfway mark of the entire mid-June-to-mid-August rally. Together it means the recent slippage is getting to the lower reaches of what could be considered a purely routine pullback after a rapid surge. Many chart handicappers have numbers between here and 3,900 that reflect more crucial support that would enable the market to avoid risk of a quick return to the June lows just above 3,600. A bump in Consumer Confidence above what was projected and an unexpected jump in job openings drove the mid-morning weakness, suggesting that the Fed’s apparent desire to tighten policy and financial conditions enough to slacken the labor market to a point where inflation succumbs could be farther off than hoped. The reflex sell-off in bonds sent the two-year Treasury yield briefly above 3.5%, a new cycle high, before it gave some back. It’s important to note that job openings are some pretty squishy, somewhat subjective data. But they take on a bit more weight now that Fed Chair Jerome Powell has used “reducing job openings without necessarily driving unemployment much higher” as a neat cover story for what he sees as his necessary hawkishness. There are plenty of links in that chain (raise rate and jawbone to weaken financial markets to soften employment to restrain inflation). And none of the means matter much if the ends (cooler inflation data) arrive in coming months. Once the job appears done, the tools can be set aside. But of course, the job remains undone, which leaves the Street where it’s been all year — with a Fed hustling to tighten into a slowing/stalling economy. It’s too early to write the day’s script but perhaps notable that the tape again firmed up a bit around the European market close (11:30am EDT). Is August front-loading some of September’s reputed storminess? A combination of expensive mega-cap tech and energy stocks is leading the downside. The former because that’s where the valuation premia and index heft are. The latter due to a spill in crude and natural gas prices on familiar growth concerns and reports that Europe is ahead of plan in building gas storage ahead of winter. Crude oil did break above its two-month downtrend recently, though not yet decisively. It’s interesting that the bullish thesis has had to morph and range a bit further afield. Months ago it was “near-term price premium shows supply is dangerously tight and the SPR release will have no impact.” Now it is “inventories are misleadingly bolstered by SPR release, which is ending and Europe embargo is coming – and by the way hurricane season.” I’m not denying the underlying fundamentals are fairly solid and the US producers are swimming in cash flow even if commodity prices make no progress. But worth noting the narrative shift. For the broad market, the “breadth thrust” momentum signals triggered in the June-July rally are doing a lot of work. They continue to make the June low plausible as a consequential bottom that should be tough to crack barring fresh macro stress. It’s also net bullish that sentiment/positioning is not optimistic (though has looked more neutral than outright pessimistic since June). But bigger picture, it’s worth noting that investors would have gotten off fairly easy if all the bear run managed was a six-month, 24% dump in the S & P 500 down to a 15x forward P/E. The S & P 500 at the June low was trading at levels first reached about 19 months earlier. In both early 2016 and late 2018 we went back closer to two years. Today the trailing three-, five- and 10-year annualized total return for the S & P 500 is still around 13%. That’s pretty good. Market doesn’t really owe the bulls anything yet. Doesn’t preclude further market generosity, but it helps to set sober expectations. Market breadth skews pretty negative, more than 3:1 down: up volume. Clearly late-August illiquidity is a factor and systematic trend-following funds are seen to be instrumental in setting marginal moves, but that works both ways and is not a reason to dismiss the price action. VIX inches above 26, still in that middle zone between relaxed and panicked, coming off another “higher low” and into some crucial data releases/seasonal flux.