SP500 Pulls Back As Consumer Sentiment Misses Expectations

Key Insights

• Michigan Consumer Sentiment declined from 63.5 in April to 57.7 in May.
• Index of Consumer Expectations decreased from 60.5 to 53.4.
• The debt crisis standoff had a negative impact on consumer mood.

Consumer Sentiment Declines Amid Debt Crisis Standoff

On May 12, the University of Michigan released preliminary Consumer Sentiment data for May. The report indicated that Consumer Sentiment declined from 63.5 to 57.7, compared to analyst consensus of 63.

Index of Consumer Expectations declined from 60.5 in April to 53.4 in May, while Current Economic Conditions decreased from 68.2 to 64.5.

The University of Michigan commented: “Consumer Sentiment tumbled 9% amid renewed concerns about the trajectory of the economy, erasing over half of the gains achieved after the all-time historic low from last June.”

According to the report, consumers focused on the flow of negative news about the economy, including the debt crisis standoff.

U.S. Dollar Gains Ground Amid Rising Demand For Safe-Haven Assets

SP500 moved lower after the release of Michigan Consumer Sentiment report. Consumer activity is the key driver for the U.S. economy. If consumers are worried about the health of the economy and spend less money, the U.S. economy may fall into recession.

U.S. Dollar Index continued to move higher amid rising demand for safe-haven assets. The rebound in Treasury yields provided additional support to the American currency.

Gold is mostly flat despite stronger dollar, supported by healthy demand for safe-haven assets.

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