Investors became less pessimistic about the near-term outlook for the stock market this week as recent economic data raised hopes of interest rate cuts.
26.1% of respondents to the American Association of Individual Investors (AAII) Sentiment Survey Said They believe the market will trend downwards over the next six months, compared with 28.3% last week.
Neutral views also increased this week, with 32.2% of investors surveyed by AAII seeing no change in market direction, up from 27.2% a week ago.
The personal consumption expenditures (PCE) price index, widely seen as the Federal Reserve’s preferred inflation gauge, fell in May, providing some relief to market participants.
Federal Reserve officials said at their June monetary policy committee meeting that they wanted more favorable data on inflation to give them more confidence that things were moving in the right direction, and the committee acknowledged that “some further progress” had been made toward the 2% inflation target.
Comments from Federal Reserve Chairman Jerome Powell on inflation also helped calm market sentiment.
However, the lackluster performance of some large-cap stocks has reduced the number of investors optimistic about the short-term outlook for the stock market.
41.7% of respondents expressed optimism about the market’s direction over the next six months, up from 44.5% last week.
The bullish and neutral figures were above their historical averages of 37.5% and 31.5%, respectively.
This week, Wall Street was treated to a shocking warning from Nike (NKE) that sales would fall 10% in the current quarter, sending the sportswear giant’s shares down more than 10% in after-hours trading.
Shares of memory chip maker Micron fell 7% in after-hours trading on Wednesday after the company gave an earnings outlook in line with expectations, masking better-than-expected third-quarter results.
Similarly, drugstore chain operator Walgreens Boots Alliance (WBA) fell more than 5% on Thursday after the company lowered its full-year outlook due to tough conditions across the retail industry.
Additionally, investors’ attention was glued to the first debate ahead of the U.S. presidential election this week between President Joe Biden and former President Donald Trump, which touched on a wide range of topics from inflation and the economy to jobs and careers.
“Interest rates have begun to cut in major markets, with US easing expected to begin in December, and the global economy remains in relatively good shape, although upcoming elections may weigh on markets,” said a recent analysis from Seeking Alpha.
The S&P 500 index (SP500) has risen about 1% over the past week, while the Dow Jones Industrial Average (DJI) rose slightly. The Nasdaq Composite Index (COMP:IND) and the Nasdaq 100 Index (Nedix) rose about 2%.
