The S&P 500 climbed 0.6% from a record high on renewed hopes that the Federal Reserve may cut interest rates this year. A flood of stronger-than-expected earnings reports from large US companies also helped support the market.
In the bond market, Treasury yields rose after the bleak preliminary report from the University of Michigan.
It suggested that sentiment among US consumers is weakening much more than economists expected, and the drop was big enough to be “statistically significant and takes sentiment to its lowest reading in about six months ” according to Joanne Hsu, director of consumer research. .
Potentially even more discouraging is that US consumers expected inflation of 3.5 percent next year, up from their forecast of 3.2 percent a month earlier. If these expectations rise, the fear is that it could trigger a vicious circle that worsens inflation.
It highlights how some companies have recently described the growing struggles among their customers, especially those with lower incomes.
The 10-year Treasury yield rose to 4.50% from 4.46% late Thursday. But the move was still relatively modest compared to its fall from 4.70 percent late last month.
Markets may remain on hold until Wednesday's expected update on US consumer-level inflation, according to Bank of America rate strategists. Traders are still thinking about one or two interest rate cuts by the Federal Reserve this year, according to data from the CME Group.
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“Right now, the market is in good spirits thanks to a decent earnings season and a Fed that has a high bar for hiking,” according to Brian Jacobsen, chief economist at Annex Wealth Management. “That mood can change quickly.”
Last week, Federal Reserve Chairman Jerome Powell helped push yields lower after he said the central bank is closer to cutting its main interest rate than raising it, despite a series of stubbornly high readings on inflation this year. The Fed has kept its key interest rate at the highest level in more than two decades in hopes of bringing high inflation under full control.
Meanwhile, a fresher-than-expected jobs report late last week suggested the U.S. economy could pull off the tricky balance of staying strong enough to avoid a bad recession, but not too strong that inflation worsens.
In bourses abroad, London's FTSE 100 rose 0.6% after the government reported that the UK economy had returned to growth at the start of the year. The performance was better than expected and broke two straight quarters where the economy contracted.
In Japan, Tokyo's Nikkei 225 rose 0.4 percent after a report showed strong auto exports narrowed the country's trade deficit and earned a solid return on overseas investments.
With AP
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