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Dow retreats after consumer sentiment rally lifts risk appetite

University of Michigan consumer sentiment jumped to 54.4, but the move was largely given back as hawkish Fed messaging kept July 29 rate hold odds near 86% while hike odds rose into year-end.

Reported · Written up by our desk · Major Pairs

The Dow Jones Industrial Average traded near 52,250 on Friday, falling nearly 300 points late in a volatile session after an early surge tied to stronger US consumer sentiment, according to FXStreet. The index slipped to just under the 52,000 level in the morning, then rebounded by more than 600 points before surrendering much of that gain later.

Early economic data offered limited support for the tape. Housing starts came in at a 1.43 million annualized pace versus a 1.31 million consensus, building permits were around 1.37 million, and industrial production rose 0.1% month over month compared with a 0.2% expected.

The afternoon reversal was driven by the University of Michigan preliminary July Consumer Sentiment Index, which rose to 54.4 versus a 51 consensus, its strongest reading since February 2000s. The same release showed one-year consumer inflation expectations fell to 4.2%, the lowest since March, while five-year expectations were steady at 3.3%.

FXStreet also noted that a voting Federal Reserve committee member used the final scheduled speech before the pre meeting blackout to signal business contacts now want action on inflation. Rate futures pricing aligned with that view, showing about 86% odds of a hold on July 29, roughly 57% odds of at least one hike by September, and close to four in five odds of at least one hike by December, with the broader market still pressured on the week, including an over 17% decline for semiconductors this month.

Latest closeDow Jones 52,552.97 ▼0.2%

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