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Pessimism on U.S. Stocks at Highest Since Rally Began (Update1)
June 28 (Bloomberg) -- Pessimism about U.S. stocks rose to the highest level since October 2002 last week, according to Investors Intelligence, on lingering concern higher interest rates will derail economic growth.
The percentage of bearish newsletter writers climbed to 36.3 percent from 35.6 percent in the week ended June 23, the New Rochelle, New York-based newsletter said. The last time investors had an outlook this bleak, the Standard & Poor's 500 Index dropped to a five-year low and then began a new bull market.
``It's probably a little overdone,'' said Paul Hickey, an analyst at Birinyi Associates Inc., a research and money management firm that oversees $300 million in Westport, Connecticut. ``People are placing too much emphasis on the minute by minute at the expense of the bigger picture.''
Analysts such as Hickey, who try to predict stock moves based on statistics such as price patterns and volume, often track investor sentiment as a contrarian indicator. A rise in bearishness or a decrease in bullishness may be signs that stocks are poised to advance because investors who view the market unfavorably may have already sold shares.
Bearishness increased as the S&P 500 dropped for a third- straight week, falling 0.6 percent to 1,244.50. The index is down 6.4 percent from a five-year high reached last month. Since October 2002, the S&P 500 has jumped 60 percent as global economic growth boomed.
Fed Meeting
Today, the Fed begins a meeting that will conclude tomorrow with policy makers raising the benchmark lending rate for a 17th straight time, economists predict. Policy makers will likely give clues as to the direction of future increases.
Last week, the Conference Board's index of leading economic indicators dropped the most since September, suggesting that two years of rising interest rates are slowing economic growth. Remarks from two central bank officials affirmed that inflation is still above the Fed's comfort level.
The percentage of newsletter writers expecting a 10 percent slide in U.S. stock markets over the next 12 months decreased to 26.3 percent from 28.8 percent, Investors Intelligence said.
Bulls also increased last week as investors left the correction camp. The number of optimistic writers climbed to 37.4 percent from 35.6 percent, which was the fewest bulls since October 2002. Investors Intelligence compiles its survey from about 100 newsletter writers.