This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. An as-forecast consumer price index report with softness at the core ratifies the market’s recent migration toward risk, growing comfort with the Federal Reserve being all but finished with tightening and a refusal to dismiss the chance of a soft economic landing. On balance, the result for stocks is a hesitation right near a fulcrum point for the S & P 500 – its 200-day moving average and the downtrend line from the January 2022 peak. In the very short term (like on a five-day rate-of-change scale) the S & P as of Wednesday’s close was getting slightly stretched. However, this is not as much as, say, mid-August before that downside reversal. The index is merely back to where it was four weeks ago (and flat with the early-May low, which came before the last 350 basis points of Fed tightening). I’ve said this week that the burden of proof is shifting to those investors who insist inflation will be sticky at high levels, and the outright decline in month-over-month core services (ex-rent measures) solidifies this thought. Who knows where inflation settles ultimately, but there is downside momentum for now. The bond market has fully moved on from the inflation story with longer-term yields rolling over. The Fed is now seen doing a final hike, two or even three small ones, but then it will likely soon pause to see the lagged effects on employment, financial conditions and consumer prices. A good debate is now getting underway around the relationship between inflation and the job market. Inflation has come far off the boil without employment softening up much at all (claims are still low, the unemployment rate is at 3.5%, job openings and quits are cooler but still strong versus history). -In the ’90s, the Fed thought unemployment anywhere below around 5% to 6% would cause inflation to accelerate, but that proved wrong. -In the 2010s, the Fed was unable to lift inflation to its 2% goal even as unemployment broke to historic lows -In other words, maybe the Fed will determine the relationship between jobs and inflation is not as fixed or precise as it has recently suggested, so the central bank need not shoot for a material weakening of the labor market to get inflation back to acceptable levels? Several separate themes are animating the early going in stocks this year: consumer cyclicals are perky on lower rates/sturdy income growth for now; hard-asset and capex/China-reopening plays are working (industrials, materials); Big Tech is getting a reprieve from brutal liquidations late last year and reduced pressure from bond yields. Former boomtime speculative tech is now two years past peak, and many of the stocks have bumped along their lows for a while. Some bases could be forming in the lucky ones, but don’t expect this group to return to glory. If things get frothy here, it’s not a good sign for sentiment and Fed reaction dynamics, but we’re a long way from there. More broadly: -Sentiment is warming from very pessimistic levels. -Volatility is draining from both stocks and bonds with index stability, most major data is done and earnings season is bringing more name-by-name action versus macro focus and the Fed meeting about three weeks away. -Earnings expectations look beatable for the fourth quarter after big cuts to forecasts, though guidance might well pressure forward estimates. Credit markets are quite supportive for now. For all of 2022, it has been smart to sell into rallies in the S & P at or above the 200-day average and when the VIX has dropped to or below 20. Both conditions are here or close by. This a nice test of whether the character of the market could be changing. Very few seem to think the rally off the October low is “the real thing,” which is a net positive. Market breadth is positive again and remains one of the stronger features of recent days’ action – starting to see a good excess of new 52-week highs over lows, hints of firming demand for equities. Some of this stems from laggards of 2022 getting mechanical relief. So far, we’ve seen no impressive “momentum thrust” yet – and still no decisive move above obvious resistance levels. But it’s moderately constructive all the same.