The American indices managed to overturn the negative climate and close positively yesterday, but without being able to change the negative sign of the fifth day, completing the third consecutive downward week.
Specifically, the Dow Jones index rose 0.54% to 33,204 points, the S&P 500 rose 0.59% to 3,844 points, while the tech Nasdaq gained 0.21% to 10,497 points.
The positive sign came despite the fact that the core measure of personal consumption expenditures, the Federal Reserve’s preferred inflation gauge, was slightly higher than economists expected on a year-over-year basis, indicating that inflation is persisting despite the Fed’s efforts to fight him.
Economic indicators released yesterday highlight the difficulty for investors, where weak numbers bring fears of a recession and strong numbers bring fear of the Fed.
US indices ended another weekly decline, with the S&P 500 down 0.2%. The Nasdaq Composite lost 1.9% this week, while the Dow diversified and gained 0.8%.
Recession worries
Recession fears have rekindled recently, dashing some investors’ hopes for a year-end rally (santa rally) and leading to heavy losses in December. Investors worry that too much tightening by central banks worldwide could push the economy into recession.
For December, the S&P 500 has lost more than 6%, while the Dow and Nasdaq have lost 4% and 8%, respectively, heading for their biggest monthly declines since September. Shares are also on pace for their worst annual performance since 2008.
Estimates
At the same time, the degree of pessimism about the stock market’s near-term direction in the latest weekly poll conducted by the Association of American Investors (AAII) climbed to 52.3%, a nine-week high, from 44.6% the previous week . The share of those optimistic fell to 20.3% from 24.3% the previous week, while those who said they were neutral about the stock’s outlook fell to 27.4% from 31.1%.
Research is a measure that shows less risk when bearish sentiment is high and more risk when bullish sentiment prevails. “Above-average market returns have often followed unusually low levels of optimism, while below-average market returns have often followed unusually high levels of optimism,” AAII reports.
At the end of the day, the University of Michigan’s consumer sentiment index rose more than expected in December to 59.7. That’s above Dow Jones analysts’ estimate of 59.1 and up from 56.8 in November.
Also, the core price index for personal consumption expenditures, which excludes food and energy prices, slowed to 4.7% in November from 5% the previous month, confirming trends in the easing of inflationary pressures. The Personal Consumption Expenditures (PCE) index fell to 5.5% on an annual basis in November from 6.1% in October.
