The U.S. stock market soared again today as Americans’ confidence in the economy jumped in May to a five-year high, lifted by a better outlook for hiring and business conditions.
The Conference Board, a New York-based private research group, said its Consumer Confidence Index rose in May to 76.2, the second straight increase. That’s up from a reading of 69.0 in April and the highest since February 2008.
Conference Board economist Lynn Franco said Americans are regaining their confidence in the economy.
“Consumer Confidence posted another gain this month and is now at a five-year high. Consumers’ assessment of current business and labor-market conditions was more positive and they were considerably more upbeat about future economic and job prospects. Back-to-back monthly gains suggest that consumer confidence is on the mend and may be regaining the traction it lost due to the fiscal cliff, payroll-tax hike, and sequester.”
With the new report, the Dow Jones Industrial Average soared by more than 200 points this morning.
Bruce Bittles, chief investment strategist for Milwaukee-based Robert W. Baird & Co. Inc., said investors are becoming increasingly optimistic.
“As the end of May came into focus, investors were getting increasingly comfortable with the stock market. China announced weakening economic conditions and Japan’s experiment with expanding the money supply was beginning to show stress. The action last week begs the question whether U.S. stocks witnessed a blow-off peak last week or merely a correction in an ongoing bull market. We are assuming the posture that the latter is more likely the case and stocks will resume the rally this summer. This is based on the assumption that the economy will avoid a recession and continue to grow slowly. Slow economic growth will anchor interest rates and prevent inflation from gaining a foothold,” Bittles stated this morning. “In addition, the labor markets will be slow to fully recover with the unemployment rate unlikely to fall to the 6.5 percent level that Bernanke is using to cause the Fed to shift monetary policy. As a result, we anticipate that the Fed will remain friendly toward the financial markets into year-end…Investors should concentrate new efforts in the strongest sectors including the financials, consumer discretionary, health care and industrials.”
