MARKET SNAP: At 6:25 a.m. ET, S&P 500 futures down 0.01%. Treasury yields lower at 2.72%. Nymex down 0.43% at $99.90. Gold up 0.83% at $1310/oz. In Europe, FTSE 100 down 0.02%, DAX up 0.58% and CAC 40 up 0.42%. In Asia, Nikkei 225 down 1.53% and Hang Seng up 0.6%.
WATCH FOR: January Import Prices (8:30 a.m. Eastern Time): seen -0.2%; previously unchanged. January Industrial Production (9:15:): seen +0.3%; previously +0.3%. January Capacity Utilization (9:15): 79.3%; previously 79.2%. February Reuters/UMich Consumer Sentiment (9:55): seen 80.0; previously 81.2. Campbell Soup, Coty, DTE Energy, Hyatt Hotels, Interpublic, ITT, JM Smucker, Lifepoint Hospitals, Scripp Networks and TRW Automotive are among companies scheduled to report quarterly results.
THE BREAKFAST BRIEFING
If this week has taught investors anything, it’s the rapid pace at which sentiment can change and markets can bounce back.
The pullback and correction chatter that dominated the markets as recently as last week has fallen by the wayside, with stocks on the verge of reclaiming record levels. The 1929 chart being passed around has been dismissed as hogwash, and investors are gearing up for the rally to take another leg higher.
To illustrate this shift in investor mindset, look no further than the American Association of Individual Investors’ weekly gauge of sentiment. The association’s Internet survey—which asks AAII members to register their bullish, bearish or neutral views on the stock market—offers a timely take on how investors feel about the markets.
Bullish sentiment rebounded sharply in the week ended Wednesday, jumping to 40.1% from 27.9% a week earlier, according to AAII. That marked the biggest weekly jump in optimism among respondents since the end of November.
Meanwhile bearish sentiment, or expectations that stock prices will fall over the next six months, dropped to 27.34%, from 36.41% a week earlier. The drop reversed two consecutive weeks where this reading was above 30%.
The uptick in optimism comes as stocks have risen in five of the past six trading days. All of the major stock indexes are now positive for February. And the S&P 500 is off only 1% so far this year, while the tech-heavy Nasdaq Composite has already turned higher for 2014.
It was just last week that stocks were hitting their lows for the year. The S&P 500 slumped 5.8% from mid-January through early February. Many market participants were gearing up for the market’s first 10% correction since the summer of 2011.
Much has changed in a short amount of time. The S&P 500 has rebounded 5.1% since Feb. 3. It rallied Thursday despite weak economic data and finished the session at 1829.83.
Worries about the economy hitting a soft patch have been cast aside.
“At the risk of looking foolish, we continue to ‘look through’ these data, believing the underlying, non-weather influenced trend of the economy is better,” says Dan Greenhaus, chief strategist at BTIG, a New York brokerage firm.
Now, the goal is to see the market push through with more conviction in order for investors to be convinced that the rally is set for another leg higher.
“The market will have to resolve the January dilemma in the next two weeks,” Kenneth Polcari, director of floor operations for O’Neil Securities, wrote to clients. “It needs to either create a higher high (breakout above 1850)… or it creates a lower high (no breakout), which would set us up for more downside pressure.”
As the past several days have shown, one week’s time can really make all the difference on Wall Street.
Morning MoneyBeat Daily Factoid: On this day in 2003, Dolly—a female sheep who was the first mammal to be cloned from an adult somatic cell—was euthanized due to premature aging, a progressive lung disease and severe arthritis.
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