Investors are clearly nervous, but at least they're getting slightly less nervous. The CNN Money Fear and Greed Index inched up to 38.9 on Thursday from 36.7, though it's still firmly planted in "Fear" territory as markets look ahead to next week's Federal Reserve decision.

The session itself was a mixed bag. The Nasdaq Composite climbed about 50 points, gaining 0.22% to close at 23,505.14, while the S&P 500 barely squeaked out a 0.11% gain to finish at 6,857.12. The Dow Jones wasn't so lucky, dropping roughly 32 points to land at 47,850.94.

Rate Cut Practically Guaranteed

What's driving the cautious optimism? Traders are betting heavily on a Fed rate cut next week, assigning nearly 90% probability to a third consecutive 25-basis-point reduction. At this point, it would be more surprising if the Fed didn't cut rates.

Earnings Winners and Losers

Individual stock moves told an interesting story about the retail landscape. Dollar General Corp. (DG) absolutely crushed it, leading S&P 500 gainers with a 14% surge after delivering better-than-expected earnings and upbeat guidance. The stock hit its highest level since August 2024, suggesting the discount retailer is finding its footing.

Salesforce Inc. (CRM) also had a good day, climbing around 4% following positive results. But not everyone celebrated. Kroger Co. (KR) dropped about 5% after posting mixed quarterly results, with revenue coming in softer than analysts hoped.

Economic Data Paints Complex Picture

The economic numbers offered their own mixed signals. Initial jobless claims fell by 27,000 to 191,000 during the last week of November, which sounds good on the surface. But U.S.-based employers announced 71,321 job cuts in November, up from 57,727 in the same period last year. Meanwhile, new orders for manufactured goods managed only a modest 0.2% month-over-month increase in September, following a revised 1.3% jump in August.

Sector Performance Splits

Most S&P 500 sectors ended Thursday in the red, with consumer staples, healthcare, and consumer discretionary stocks taking the biggest hits. Industrials and information technology bucked the trend, managing to close higher and giving the major indexes some support.

Looking ahead, investors are waiting on earnings from Victoria's Secret & Co. (VSCO) and MoneyHero Ltd. (MNY).

Understanding the Fear Gauge

So what exactly is this Fear and Greed Index everyone keeps talking about? It's a sentiment measure built on a simple premise: fear pushes stock prices down, greed pushes them up. The index crunches seven equal-weighted indicators into a single reading that ranges from 0 (maximum fear) to 100 (maximum greed).

At 38.9, Thursday's reading suggests investors remain worried, even if they're slightly less worried than the day before. With the Fed decision looming and economic data sending mixed messages, it's no wonder market participants are playing it cautious.