S&P 500 Rallies as Consumer Sentiment Hits 6-Month High

The S&P 500 (SPX) is trading higher on Friday following an encouraging consumer sentiment update from the University of Michigan.

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The preliminary Index of Consumer Sentiment for February rose to 57.3 from 56.4 in January, marking a six-month high. At the same time, consumers remain concerned about the state of their personal finances and the risk of losing their jobs. In addition, sentiment increased among people with large portfolios, while it stagnated for those without stock holdings.

Short-Term Inflation Expectations Drop to 13-Month Low

Meanwhile, consumers now expect year-ahead inflation of 3.5%, the lowest level since January 2025 and down from 4.0% in the prior month. However, long-term inflation expectations rose for a second consecutive month to 3.4% from 3.3%.

“This month’s reading still exceeds those seen in 2024 and remains well above the 2.3-3.0% range seen in the two years pre-pandemic,” said Surveys of Consumers Director Joanne Hsu.

Both short- and long-term inflation expectations remain above the Fed’s target of 2%. Core personal consumption expenditures (PCE), which is the central bank’s preferred gauge of inflation, was 2.8% in the most recent reading.