Consumer Sentiment in U.S. Unexpectedly Surges to 13-Year High -- Dow, S&P 500 and Nasdaq hit record highs
Consumer Sentiment in U.S. Unexpectedly Surges to 13-Year High

United States consumer sentiment unexpectedly grew to a 13-year high as Americans’ perceptions of the U.S. economy and their own finances rebounded following several major hurricanes, a University of Michigan survey showed Friday. Dow, S&P 500 and Nasdaq hit record highs.

HIGHLIGHTS OF MICHIGAN SENTIMENT (OCTOBER, PRELIMINARY)

  • Sentiment index rose to 101.1 (est. 95), highest since Jan. 2004, from 95.1 in Sept.
  • Current conditions gauge, which measures Americans’ perceptions of their finances, jumped to 116.4, highest since Nov. 2000, from 111.7
  • Expectations measure increased to 91.3, highest since Jan. 2004, from 84.4

Key Takeaways

The jump in sentiment, which was greater than any analyst had projected, may reflect several trends: falling gasoline prices following a hurricane-related spike; repeated record highs for the stock market; a 16-year low in unemployment; and post-storm recovery efforts driving a rebound in economic growth.

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The advance in the main gauge spanned age and income subgroups as well as partisan views, according to the report. Almost six out of every 10 consumers thought the economy had recently improved in early October, the university said.

Not all measures in the survey showed big gains: the share of consumers reporting improved finances held steady at about half, while the proportion expecting gains in their financial situation fell slightly to 40 percent.

Official’s Views

“While the early October surge indicates greater optimism about the future course of the economy, it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement. “Indeed, nothing in the latest survey indicates that consumers anticipate an economic downturn anytime soon — which contrarians may consider a clear warning sign of trouble ahead.”

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Other Details

  • 83 percent of respondents saw buying conditions for household durables as favorable, most in more than a decade; positive vehicle-buying attitudes at 75 percent, highest since 2004
  • Consumers saw inflation rate in the next year at 2.3 percent after 2.7 percent the prior month
  • Inflation rate over next five to 10 years seen at 2.4 percent after 2.5 percent in September

U.S. stocks reached record highs on Friday as investors bet on another strong earnings season.

The S&P 500 rose 0.15 percent and hit an all-time intraday high, with information technology leading advancers. The Nasdaq composite also hit a record, advancing 0.3 percent. The Dow Jones industrial average traded 48 points higher, with American Express contributing the most to the gains.

As of 12:00PM EST 10/13/2017

Symbol
Name
Price
Change
%Change
DJIADow Industrials22877.08
36.070.16%
S&P 500S&P 500 Index2555.94
5.010.20%
NASDAQNASDAQ Composite6612.41
20.900.32%

 

“We’ve had three good quarters in a row for earnings, if you go back to the fourth quarter of 2016,” said Ernie Cecilia, CIO at Bryn Mawr Trust. “Last quarter, we also saw an improvement in revenue growth as it moved ahead of its long-term trend, which is a positive.”

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A trader works on the floor of the New York Stock Exchange (NYSE).

Lucas Jackson | Reuters
A trader works on the floor of the New York Stock Exchange (NYSE).

Corporate earnings for the S&P 500 have grown 6.1 percent, 15.5 percent and 10.8 percent in the fourth quarter of last year and the first and second quarters of 2017, respectively.

Earnings are expected to grow by 4 percent for the third quarter, according to S&P Capital IQ.

“Our early read on the overall results remains positive with 87% of the early 3Q 2017 reporters beating EPS estimates,” said Nick Raich, CEO of The Earnings Scout, in a note to clients.

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Shares of Bank of America briefly rose more than 1 percent in the premarket after reporting earnings and revenue that topped expectations. The stock traded 0.4 percent higher as of 10:04 a.m. in New York.

JPMorgan Chase and Citigroup also posted stronger-than-expected quarterly results on Thursday.

Streaming giant Netflix is set to report its quarterly results Monday after the bell and Goldman Sachs is betting on a strong report.

Analysts at Goldman raised their price target on Netflix shares to $235 from $200 a share, noting: “We believe consensus subscriber estimates for Netflix ahead of Monday’s earnings remain too low, particularly for the quarter, 4Q, and beyond.”

Shares of Netflix advanced nearly 2 percent.

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Wall Street also digested lighter-than-expected economic data in the form of inflation and retail sales numbers. The consumer price index rose 0.6 percent last month, below the expected gain of 0.7 percent. Retail sales, meanwhile, gained 1.6 percent, while analysts polled by Reuters expected a gain of 1.7 percent.

Treasury yields fell on the news, with the benchmark 10-year yield trading at 2.28 percent.

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