dec 17  welcome to the home for realtime coverage of markets brought to you by reuters reporters you can share your thoughts with us at marketsresearchthomsonreuterscom as part of the most recent american association of individual investors aaii sentiment survey read more  aaii asked its members their assessment of the weakness that smallcap stocks have experienced over the past four weeks read more aaii reported that three out of 10 respondents 30 said that they attributed their poor performance to a volatile and inflationary market with smallcap stocks being more sensitive to macroeconomic trends conversely 24 of respondents had a neutral or unfazed point of view with respondents saying they don’t invest in smallcap stocks meanwhile about 15 of respondents mentioned seeking a safer investment in largecap stocks saying larger companies can absorb the higher costs and protect their profits better against this 14 of respondents attributed smallcap weakness to ongoing factors of the coronavirus such as the new omicron variant lastly 11 of respondents had a positive outlook on the situation indicating that this could be a buying opportunity for those who invest in smallcap stocks here are a couple of quotes from investors on the matter “it’s difficult to compete with larger companies that can absorb the increased salaries competition for skilled workers as well as financing costs the supply chain has a negative impact on both types of companies but again most large caps can absorb this better than small caps “it’s because of yearend selling and correction it’s an opportunity to buy quality smallcap value” holiday air traffic soars above last years level but flying under precovid normal 1238 est1738 gmt tis the season once again for candy canes egg nog family bickering and queueing up at airport security in your socks the transportation security administrations tsa passenger throughput reading has emerged as one of the pandemics most useful and valued indicators providing uptotheminute data on commercial air travel and by extension the pace at which economic activity is returning to precovid levels with holiday travel starting to peak passenger traffic at airport security checkpoints on thursday december 16 was 206 million the good news is that represents a healthy 1435 increase over the corresponding weekday of 2020 the bad news is throughput remains 165 shy of the same thursday in 2019 before covid struck in earnest bringing the global economy  and mobility  to a screeching halt that pandemic with its succession of variants has been a rude guest long overstaying its welcome and delaying a full recovery from the crisis omicron the new dominant variant has kept scientists and policy makers on their toes with social distancing testing and mask mandates in constant flux read more as illustrated by the graphic below as air travel struggles to regain altitude airline stocks have suffered the sp 1500 airline index spcomair is down nearly 7 yeartodate and at current levels has lost nearly a third of its value since its early april peak as the dust settled further on wednesdays federal reserve announcements some economists were starting voice concerns at mizuho securities usa us chief economist steven ricchiuto was fairly direct given our less constructive view on the macro outlook we believe following through on the tightening suggested would be a mistake ricchiuto wrote the fed the economist writes wants to defend its inflation fighting credibility as it faces surging prices triggered by the government’s virus mitigation strategy and stimulus provided to ease the burden of lockdowns but this suggests to ricchiuto that there are unknown and atypical dynamics at work in the economy and that policy based on fomc forecasts has a poor track record even in normal times so he says the high degree of uncertainty in the economy could lead to a significant policy mistake while ethan harris global economist at bofa doesnt seem to be complaining about the tightening he sounds unimpressed with the plans details harris describes what the fed is doing as a pivot from ultradovish to superdovish and looks at how far they need to go in past cycles the fed would already have been raising rates in the feds new regime however they dont hike until they hit their goals hence the funds rate will be zero at a time when normally it would be approaching neutral wrote harris this creates a challenging end game where they try to move to neutral or higher without causing a major shock to the economy he wrote mostly stable year ahead for us public finance  moodys 1146 est1646 gmt most us public finance sectors have a stable outlook for 2022 while a few are positive and only one sector  nonprofit and public healthcare  has a negative outlook moodys investors service said this week tax revenue growth in the 0 to 5 range and massive federal aid were drivers for the state sectors stable outlook local governments with total revenue expected to climb 1 to 3 and their own share of federal cash related to the pandemic and infrastructure were also deemed stable by the credit rating agency nonprofit healthcare on the other hand is facing a 2 to 9 decline in operating cash flow as expenses grow mainly due to staffing shortages increasing labor costs other factors pushing expenses higher are supply chain disruptions increased drug costs higher inflation and increased investment in cybersecurity moodys said in a report with increased demand anticipated next year the airports toll roads and public ports sectors have positive outlooks other sectors with stable outlooks for 2022 include higher education mass transit and public power lower income households are expecting to spend more even as they anticipate higher inflation supported by wage growth as a strong labor demand continues to pull people into the jobs market at higher wages nearterm annual inflation expectations have climbed to an alltime high of 6 in november 2021 while spending intentions have also jumped to an record yearonyear high of 57 driven largely by a 92 jump among the lowest income earners according to ny fed’s survey of consumer expectations recent rise in wages among this income group could support these spending aims when economists at morgan stanley looked at covidcpi for low income households it was running at an annual 50 pace augustoctober 2021 average compared to average hourly earnings for lowerwage industries running at 74 yearonyear putting annual real wage growth for lowerwage earners at 24 the holiday shopping season appears poised to be a recordbreaking one and lowerincome cohorts seem to be operating with relatively better buying power they write moving into 2022 morgan stanley expects energy prices to ease after peaking in november and supply chain disruptions to lessen their hold on inflationary pressures this coupled with continued job and wage growth backed by a strong labor demand should in turn boost consumer confidence that is unless omicron throws a wrench in these plans the percentage of investors with a bullish shortterm outlook for the us stock market has slid to its lowest level in three months in the latest american association of individual investors sentiment survey aaii with this the number of investors describing their outlook for stocks as bearish rose to the upper end of its historical range aaii reported that bullish sentiment or expectations that stock prices will rise over the next six months fell 45 percentage points to 252 this is the fourth consecutive week that bullish sentiment remains below the historical average of 380 bullish sentiment was last lower on september 16 2021 224 bearish sentiment or expectations that stock prices will fall over the next six months gained by 88 percentage points to 393 this is bearish sentiment’s fourth consecutive week above the historical average of 305 neutral sentiment or expectations that stock prices will stay essentially unchanged over the next six months declined by 43 percentage points to 354 this is the second consecutive week that neutral sentiment is above the historical average of 315 aaii noted that bullish sentiment is at an unusually low level historically unusually low levels of optimism have been followed by betterthanaverage and betterthanmedian returns for the sp 500 index over the following six and 12month periods additionally aaii said that bearish sentiment is near the top end of its typical range as noted above the breakpoint between typical and unusually high levels of pessimism is currently 401 with these changes the bullbear spread fell to 141 from 08 last week read more  wall street slid into the red right out of the starting gate on friday as investors with little or no catalysts to chew on continued to acclimate themselves to the new normal of pending rate hikes and tapering asset purchases from the federal reserve all three major us stock indexes are sharply lower with energy spny financials spsy and materials splrcm all vying for the title of biggest loser indeed in a change from the previous trading day value stocks ivx are faring worse than growth igx the sp 500 and the nasdaq are on track for their third weekly decline over the last four and the dow has set a course for its fourth losing week in the last five new york federal reserve president john williams in an interview on cnbc parroted fed chair jerome powells wednesday remarks that inflation and other economic data will be closely watched in the coming months for clues regarding the feds taper timeline and rate hikes read more the word omicron remains on everyones lips as the nature and extent of this latest covid variant is causing scientists to reconsider their 2022 expectations for the pandemic read more today is triple witching nee quadruple witching until onechicago ceased offering single stock futures in september 2020 which is the simultaneous expiration of stock options stock index futures and stock index options contracts which takes place once every quarter triple witching can cause an increase in trading volume andor volatility here is your opening snapshot the sp 500 index spx ended at a record high of 471202 on december 10 it has since backed away from that level by only about 1 meanwhile however the percentage of sp 500 stocks trading above their 50day moving average dma remains severely depressed relative to earlier in the year when the spx was much lower this measures divergence vs the sp 500 has been a problem for quite some time in april it peaked at 92 more recently in midnovember it could only hit 74 currently only around 54 of spx stocks are trading above this closely followed intermediateterm moving average that said recent sub30 lows in this measure offer the potential that enough stocks within the benchmark index may have become sufficiently washed out that there may be potential for a rotation away from the few tech titans driving the index and a broader advance to take hold read more there were a number of lows from the latespring to earlyfall 2019 in the 2731 area in september and october 2020 there were lows at 25 and 28 more recently in september and november this measure stabilized at 24 and 29 read more a push above the december high at 63 may lead to increasing momentum and see this measure push up above 75 conversely a fall below this weeks low at 50 may see downside pressure intensify which may become increasingly difficult for the spx to endure especially if the recent lows give way of note in the severe sp 500 declines in late2018 and early2020 this measure bottomed very close to zero for fridays live markets posts prior to 0900 est1400 gmt  click here read more terence gabriel is a reuters market analyst the views expressed are his own