This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. The market acts better, even during the current congestion/pullback phase, with decent sector rotation, good support a few percent underneath and a pattern of intraday strength. Still, after an 8.5% year-to-date pop in under six weeks as of Tuesday’s close, the S & P 500 has a thinner margin of safety. It must work to absorb the pricing-in of another potential rate hike and some emotional, messy trading in parts of tech. The S & P 500 has some room to retreat before upsetting the broader picture of a decent little uptrend, one that has won some points from many handicappers for its breadth, resilience, and risk-seeking tone. Holding above the early-Feb. low of 4,030 would be ideal for the bulls, also near the 20-day moving average. Down just under 4,000 would represent a routine 5% pullback. If it goes much deeper than that, we’ll get a restart of the “just another bear-market rally” chorus. Federal Reserve Chair Jerome Powell essentially put policy into ” data dependent ” mode, now going in 25 basis point steps at most every six to seven weeks. Stocks rallied the days before, during and after the Fed hike, a decent sign Wall Street can handle the current stance. Investors are pleased that Powell seems willing to let the economy prove it can land softly , and he is not insisting unemployment must rise a lot to suppress inflation. The destination for short-term rates for now seems as it has for a while: 5%, plus or minus a bit. So far, the market is making its peace with this, but of course the reassurance only lasts if the inflation data continues to provide relief and the economy plugs along. The one-year Treasury yield shows the market taking notice of the hot Friday jobs number and the potential for a “no landing” economic scenario. The high-energy money is again whipping around the market. We’ve seen the monster moves off depressed levels for the old spec-tech favorites and then this week the silly trading in anything claiming to be an artificial intelligence play. The fact that it seems to be adding/subtracting tens of billions in market cap in real time to stocks like Microsoft and Alphabet is an overreach, for sure, though the action does reflect some underlying concerns over Google’s franchise. Worth noting GOOGL shares are down nearly 8% Wednesday afternoon, but they are still only back to week-ago levels. MSFT has opened its biggest cap versus GOOGL in terms of forward price-earnings since Alphabet’s IPO. MSFT back above 25x, pretty much pre-pandemic peak, while GOOGL slides along with perceptions of its long-term moat and cost discipline. Is it an opportunity for anyone thinking the short-term AI hype is getting overdone? Some are concerned about the heady resurgence of retail-trading activity and wild games in lower-quality stocks and short-dated options. It’s never great if it goes too far or dominates the tape. It’s probably too early to say it reflects a core risk to the market: The test is whether the frothy stuff can calm down without undermining the broad index support. In a way, the professional nervousness from watching the amateur speculative shenanigans has a way of keeping broader investor sentiment in check – this happened in mid-2020, a few months off the Covid low, when I tried to make this point. Market breadth is negative Wednesday: 2:1 declining/advancing volume, though new highs continue to outpace lows almost every day. The CBOE Volatility Index is up a point and just under 20, bracing for a test of the new-year rally but still at unthreatening levels.