The market got a huge lift this morning after consumer sentiment rose in May to the highest level since September.
The number the Consumer Confidence Index reported surged to 54.9 from a revised 40.8 in April and that was a huge surprise. Wall Street had been bracing for a number around 42.
Consumer confidence is important to the economy because consumer spending drives 70% of our economic growth. The consumers’ upbeat mood could make them more likely to spend more but I still don’t believe everyone will be running out to purchase the big ticket items like cars and houses.
If we had gotten a lower number or the one economists had been looking for, I don’t think we would be seeing the huge rally. (If consumers are uncertain about the economy, they will buy less, and the economy will slow further).
If the Consumer Confidence Index is trending upwards, this usually means the market will probably go higher, as well. It doesn’t always work that way but today’s surprising number has pushed the Dow to a gain of 150 points to 8,427. The S&P is up 16 to 903 while the Nasdaq has soared 2.5% on the news, rising 43 points to 1,735.