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When the bulls come out to play, the bears are able to pounce.
The S&P 500 reached its seventeenth record-high shut of 2024 on Tuesday, although it has since pulled again a bit from that milestone on renewed inflation concerns. The Dow Jones Industrial Common index has additionally set repeated report highs this 12 months, and the Nasdaq Composite closed in February at a report excessive for the primary time since 2021. Gold and bitcoin have additionally surged to all-time highs.
Unsurprisingly, a number of flashing indicators counsel that traders are feeling good concerning the market:
• CNN’s Worry & Greed Index: The indicator, which measures seven barometers of market sentiment together with the VIX, Wall Avenue’s most well-known measure of anticipated inventory volatility, is in “greed” territory.
• AAII Investor Sentiment Survey: The most recent studying, which surveys people weekly on the place they see the inventory market headed within the subsequent six months, confirmed that roughly 46% or traders suppose the market will probably be heading in a “bullish” path inside that time-frame. The historic common for such sentiment is 37.5%.
• Charles Schwab Dealer Sentiment Survey: About 53% of respondents to the newest survey reported a bullish outlook for US stocks, a bounce from 32% throughout the fourth quarter of 2023. That’s the best degree of bullishness seen because the survey launched in 2021.
However these indicators of market optimism might counsel hassle forward. Market sentiment is usually seen as a contrarian indicator. That implies that when the herd is optimistic, cash managers take it as an indication that shares will fall, and vice versa.
A part of that reasoning is as a result of traders, and in flip market sentiment, aren’t at all times rational — a worry of lacking out or of taking deep losses can drive their choices, that means they’ll have a tendency to purchase at market highs and promote at lows. In consequence, cheer on Wall Avenue doesn’t at all times imply there’s precise help for a continued rally.
The Buyers Intelligence bull-bear ratio is one other indicator that measures the extent of optimistic versus pessimistic advisers. Yardeni Analysis notes that the ratio fell to a cyclical low of 0.57 throughout the week of October 11, 2022, the bottom studying because the monetary disaster. The prior bear market reached its backside the next day.
“We turned bullish in early November (2022), figuring that sentiment was a lot too bearish and that essentially the most widely expected recession of all occasions would proceed to be a no-show,” the researchers wrote in a Wednesday be aware.
Quick ahead, the bull-bear ratio rose this previous week to 4.20, the best studying since December 2017, based on Yardeni Analysis.
Nonetheless, shares have gained on extra than simply good vibes this 12 months.
A slate of knowledge launched in current months reveals that the financial system stays resilient, regardless of rates of interest staying at a 23-year excessive since final July. The financial system added a robust 275,000 jobs in February, based on information from the Bureau of Labor Statistics. In January, the Private Consumption Expenditures worth index, the Fed’s preferred inflation gauge, slowed to its slowest tempo in additional than two years.
That information has stored the Consumed observe to ease charges this 12 months, with markets extensively anticipating the primary minimize to happen in June or July, based on the CME FedWatch Instrument.
The current earnings season additionally demonstrated the financial system’s power. Fourth-quarter earnings for S&P 500 firms are on observe to develop 4.1% from the 12 months earlier than, based on FactSet information.
Rising power costs helped to gas one more sizzling inflation studying for February, studies my colleague Alicia Wallace.
A carefully watched gauge of US wholesale inflation rose at its quickest tempo in months, based on new information launched Thursday. Whereas a seasonal power worth surge is on the root of the achieve, and less-volatile classes are displaying indicators of a continued cooldown, the most recent Producer Value Index is one more reminder of the arduous course of to rein in inflation.
The PPI, which measures the typical change in costs that producers and producers pay to suppliers, rose 1.6% for the 12 months led to February, leaping from a 1% enhance in January, based on Bureau of Labor Statistics information. Economists had projected an annual achieve of 1.1% for February.
On a month-to-month foundation, PPI rose 0.6%. That’s double economists’ expectations for costs to rise 0.3% for the month. Power costs soared 4.4% from January and registered the best month-to-month enhance since August 2023.
PPI captures common worth shifts earlier than they attain customers and serves as a possible sign for the costs customers finally find yourself paying.
“The February PPI report was a combined bag,” Gus Faucher, chief economist for PNC Monetary Companies, wrote in a be aware issued Thursday. “Inflationary pressures stay within the pipeline, however with provide and demand persevering with to normalize after the pandemic, inflation continues to steadily sluggish.”
Spending at US retailers rebounded final month as Individuals shelled out extra for gasoline, studies my colleague Bryan Mena.
Retail gross sales at shops, on-line and in eating places rose 0.6% in February from the prior month, up from January’s revised 1.1% decline, the Commerce Division reported Thursday. That was barely beneath economists’ expectations. The figures are adjusted for seasonal swings however not inflation.
January’s sharp decline was principally attributed to the chilly climate maintaining customers hunkered down at house. The broader US financial system stays on a powerful footing, with employers persevering with to rent and Individuals nonetheless raking in robust wage features. Retail spending has elevated in seven of the previous 10 months by February.
Gross sales had been up throughout most classes final month, rising essentially the most at house enchancment shops, by a stable 2.2%. In February, automotive gross sales climbed 1.8%, purchases of electronics and home equipment elevated 1.5% and gross sales at eating places rose 0.4%.
Gasoline station gross sales elevated 0.9% in February from January.
In the meantime, furnishings gross sales dropped final month, falling 1.1% from January. Gross sales at grocery shops, clothes retailers and on-line had been additionally down in February.