US Consumer Sentiment Jumps 5.7% In February: What It Means For The Markets

The SPDR S&P 500 ETF Trust SPY traded lower Friday after the latest reading of consumer confidence suggests rising prices and economic uncertainty are not negatively impacting U.S. consumers.

What Happened: The University of Michigan has announced the preliminary results of its February Survey of Consumers. The index for consumer sentiment was up 5.7% year-over-year and 2.3% compared to January. The index for economic conditions was also up 6.5% year-over-year and 6.1% on a monthly basis.

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The consumer sentiment index suggests consumers aren't particularly concerned about inflation, economic uncertainty and sluggish financial markets. The Labor Department reported in January that the Consumer Price Index (CPI) was up just 6.5% in December, down from a 40-year high of 9.1% back in June.

The University of Michigan reported the index for consumer expectations dropped 0.6% compared to January but is up 4.9% from a year ago.

Why It Matters: The S&P 500 is on track for its worst week in two months following a batch of disappointing earnings reports.

The University of Michigan said Friday the median expected year-ahead inflation rate among consumers is 4.2%, up from 3.9% in January.

While inflation may finally be subsiding, it's still well above the Federal Reserve's long-term target of 2%. It remains to be seen just how much higher the Fed will need to raise interest rates to bring inflation down to its target range.

Investors will get their next key economic update Tuesday when the Labor Department releases its January CPI reading.

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