Sentiment Remains Remarkably Bearish, Which Is Bullish

Stock price indexes are back at record highs. Yet the stock market's sentiment indicators have turned stubbornly bearish over the past couple of weeks. We noted this development a week ago and concluded that it might be a bullish signal from a contrarian perspective. We aren't sure why there are more bears and fewer bulls recently. Last week, the 10-year Treasury bond yield fell from 4.79% on January 14 to 4.60% today. That move was triggered by cooler-than-expected inflation news and dovish comments by a Fed governor.

The current Q4-2024 earnings reporting season is starting with lots of better-than-expected results, led by the big banks. The news on AI capital spending remains bullish for semiconductor stocks. The Citibank Economic Surprise Index is back in positive territory (chart).