Investor pessimism about the stock market's near-term outlook eased this week as recent economic data fueled hopes for interest rate cuts.
A total of 26.1% of respondents in the American Association of Individual Investors, or AAII, sentiment survey saying They believe the market will trend lower over the next six months, compared with 28.3% last week.
Neutral sentiment also rose this week, with 32.2% of investors surveyed by AAII expecting no change in market direction. A week ago, the figure was 27.2%.
The personal consumption expenditures (PCE) price index for May, widely considered the Federal Reserve's preferred gauge of inflation, moderated in May, providing some relief to market participants.
US Federal Reserve officials at their June policy-setting committee meeting said they were looking for more favourable data on inflation to gain more confidence that things were moving in the right direction, and the committee acknowledged there had been “modest further progress” toward the 2% inflation target.
Federal Reserve Chairman Jerome Powell's statement on inflation also calmed sentiments.
However, weak gains in some heavyweight stocks led to a decline in the number of investors feeling optimistic about the near-term outlook for the stock market.
A total of 41.7% of respondents were optimistic about the direction of the market in the next six months, compared with 44.5% last week.
Both the bullish and neutral figures were above the historical averages of 37.5% and 31.5%, respectively.
During the week, Wall Street digested Nike's (NKE) shocking warning that sales will decline 10% in its current quarter, leading the sportswear giant's shares to fall more than 10% in after-hours trading.
Micron shares fell 7% in after-hours trading Wednesday after the memory chip maker issued guidance that was in line with estimates, overshadowing a stronger-than-expected third quarter.
Similarly, drugstore chain operator Walgreens Boots Alliance (WBA) also fell more than 5% on Thursday after lowering its full-year outlook due to a tough overall retail environment.
Investors' eyes were also on the first US presidential election debate of the week between President Joe Biden and former leader Donald Trump, which addressed issues ranging from inflation, the economy to employment and jobs.
“Rate cuts have begun in key markets, with U.S. monetary policy easing expected to begin in December, and the upcoming election could weigh on markets, but the global economy remains in relatively good shape,” noted a recent analysis by Seeking Alpha.
The S&P 500 index (SP500) rose almost 1% in the last week, while the Dow Jones Industrial Average index (DJI) rose slightly. Both the NASDAQ Composite Index (COMP:IND) and the NASDAQ 100 Index (NDX) advanced almost 2%.
