Consumer Sentiment Exceeds Estimates, S&P 500 Tests New Highs

Key Insights

• Consumer Sentiment incresed from 59.7 in December to 64.9 in January. 
• Pending Home Sales grew by 2.5% in December. 
• Both reports exceeded analyst estimates and provided additional support to U.S. stocks. 

Pending Home Sales Exceed Analyst Estimates

On January 27, U.S. released the final reading of the Michigan Consumer Sentiment report for January. The report indicated that Consumer Sentiment improved from 59.7 in December to 64.9 in January, compared to analyst consensus of 64.6.

Traders also had a chance to take a look at the Pending Home Sales data for December. The report indicated that Pending Home Sales grew by 2.5% month-over-month, compared to analyst consensus of -0.9%.

Yesterday, New Home Sales report showed that New Home Sales had surprisingly increased by 2.3% in December. Today’s Pending Home Sales data indicates that housing market activity has started to recover as buyers reacted to the recent pullback in mortgage rates.

It remains to be seen whether improvements in the housing market will make the Fed more hawkish. The current market consensus remains intact, and traders expect that the Fed will raise the interest rate by 25 bps at the next meeting on February 1.

S&P 500 Tests New Highs After Consumer Sentiment Data

S&P 500 moved towards the 4080 level after the release of the better-than-expected Consumer Sentiment and Pending Home Sales data. The recent economic reports show that the economy remains in a decent shape. Traders are not worried about hawkish Fed and focus on the strength of the economy.

U.S. Dollar Index is currently trying to settle back below the 102 level. As noted above, traders do not believe that recent economic reports will make the Fed more hawkish, although there is some demand for the American currency near multi-month lows.

Gold remains stuck below the $1930 level. Gold markets showed little reaction to the reports, although Treasury yields have started to move higher, which may put some pressure on the price of gold.

For a look at all of today’s economic events, check out our economic calendar.