Individual investor pessimism nears Great Recession levels. (0:15) DOGE layoffs starting to show in data. (2:39) Amazon unveils quantum chip. (4:40)Show NotesMedian age of first-time homebuyers tops 50Analysts applaud NvidiaEpisode transcripts: seekingalpha.com/wsb Sign up for our daily newsletter here and for full access to analyst ratings, stock quant scores, dividend grades, subscribe to Seeking Alpha Premium at seekingalpha.com/subscriptions.
Full Episode
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Thursday, February 27th, and I'm your host, Kim Kahn. Our top story so far, it's a country bear jamboree.
Bearish sentiment among individual investors surged to the highest level in two and a half years this past week as the tech and momentum trades showed some vulnerability.
The American Association of Individual Investors said in its survey for the week ending February 26th that the bearish camp, those who think the market will be lower in the next six months, jumped to 60.6% from 40.5% the week before. Bulls fell to 19.4% from 29.2%. The spread between bulls and bears jumped to 41.2% in favor of the bears, up from 11.3%.
Bearish sentiment hasn't been that high since September 2022, when the level hit 60.87%. That year, the S&P 500 fell 25% from January to October and saw the worst performance in the first six months of the year since 1970. Before that, you'd have to go back to the financial crisis to see bearish levels above 60%, with bear sentiment hitting 70.27% in March 2009.
The spread of 41.2% to the bears hasn't been this high since it hit 43.1% in September 2022. Before that, it would be March 2009's 51.4%. The stock market has seen a recent stumble, with the S&P 500 off 3% from its recent high, but it's still up 1.3% year-to-date. The Nasdaq is off just 1.2% for the year, and the Dow is up 2.1%. The bond market may hold a small clue to the pessimism.
The 10-year Treasury yield has dropped from near 4.8% in January to close to 4.3%. Given inflation expectations rising, the drop in rates looks more like pessimism on growth, which could bring a U.S. recession back into the conversation. Looking to today's economic data, January durable goods orders rose after two straight months of decreases of 3.1% and topping the 2% consensus.
But core durable orders ex-transportation were virtually unchanged, compared with the 0.3% expected. Wells Fargo economists noted the 0.8% rise in non-defense ex-aircraft orders, which is now rising at the fastest three-month pace since 2022.
To the extent this pickup in core capital goods orders does reflect a pull forward in demand, we should brace for some payback as that intention subsides mid to late in the year. On the labor front, weekly jobless claims rose by 22,000 to 242,000, sharply higher than the 224,000 consensus. That's up from a revised 220,000 the week before.
In a sign federal layoffs may be starting to show up, claims filed in the District of Columbia rose by 421 to 2,047. The claims filed in Maryland dropped by 147 to 2512, and claims filed in Virginia declined by 533 to 2366. Pantheon macroeconomist Samuel Toom says extreme weather was chiefly responsible for the pickup in initial claims last week.
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