Wall Street Rises 8th Week

The S&P 500 added 0.4% to 7,473.47, pulling closer to its all-time high, as US stocks rose for the eighth straight week, the best such streak since 2023 [1]. This increase in the stock market comes despite a survey showing that American consumers are feeling even worse about the economy, with sentiment falling to a record low.

Market Drivers

The strength in the stock market is coming from companies topping analysts' expectations for earnings, with Ross Stores rising 8.1% after reporting profit and revenue that easily beat expectations [1]. Estee Lauder jumped 11.9% after saying it was no longer considering a possible merger with Puig, and Workday and Zoom Communications also delivered better-than-expected profit reports [1]. These positive earnings reports have helped US stocks remain near their records, as stock prices tend to follow the path of corporate profits over the long term [1].

Economic Sentiment

However, the survey of US consumers by the University of Michigan found that sentiment fell to a record low, with households feeling worried about the high inflation caused by expensive oil due to the war with Iran [1]. US consumers are forecasting inflation to worsen to 4.8% in the coming 12 months, up from 4.7% last month, according to the survey [1]. This rise in inflation expectations is a concern for economists, as it can drive behavior that creates a vicious cycle that makes inflation worse [1].

What to Watch

• The next Federal Reserve meeting to see if they will increase interest rates to combat high inflation
• The upcoming consumer price index (CPI) release to gauge the current state of inflation
• The 10-year Treasury yield, which remains well above its 3.97% level from before the war, threatening to slow economies [1]

The real significance of this trend is that the disconnect between Wall Street and Main Street is growing, with the stock market continuing to rise despite worsening economic sentiment among households [2]. As the Federal Reserve considers its next move, the question remains whether they will prioritize controlling inflation or supporting economic growth.