US consumer sentiment data tempers investor enthusiasm

US consumer sentiment data released on Friday kept a lid on consumer enthusiasm as the data suggested inflation remains a key concern for consumers.

The Dow closed 0.32 per cent higher to post its 8th consecutive positive close. The S&P 500 rose 0.16 per cent, while the Nasdaq just tipped into the red closing 0.03 per cent lower.

Turning to US sectors, the best performer was Consumer Staples which closed up 0.64 per cent. The worst performing sector was Consumer Discretionary which finished 0.61 per cent lower.

The three major indexes finished the week in the positive, with the Dow the biggest gainer adding 2.16 per cent for the week, its fourth winning week in a row. The S&P 500 and the Nasdaq Composite both posted a third consecutive winning week, rising 1.85 per cent and 1.14 per cent, respectively.

Investor enthusiasm was kept in check after consumer sentiment data released Friday morning showed a big uptick in inflation expectations. The preliminary May reading for the University of Michigan’s consumer sentiment index came in at 67.4, far below a Dow Jones estimate of 76 and marking its lowest reading in about six months.

Investors interpreted the data as indicating that inflation remains grudgingly sticky and is not moving in the right direction. The Federal Reserve’s rate-cutting path will be further influenced by how much of a slowdown is seen in consumer spending and in hiring.

Investors have been more optimistic lately after the Fed indicated the next move is unlikely to be a hike, pointing to a cap on interest rates that could be bullish for equities.
All eyes will now turn to April’s consumer price index reading which is due to be released on Wednesday.

In European news all major markets finished in the green, with the Stoxx 600, as well as Germany’s Dax, France’s CAC 40 and the U.K.’s FTSE 100 notching fresh record highs. The pan-

European Stoxx 600 index was up by 0.8 per cent by the close. In other news, the U.K. economy emerged from recession with first quarter GDP data showing a 0.6 per cent rise.

In local news, the focus this week will turn to the release of the Federal budget on Tuesday. Expectations are for a surplus and cost-of-living relief measures that may bolster the case for the Reserve Bank to keep interest rates high as it fights inflation.


The SPI futures are pointing to a 0.2 per cent fall.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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