Stocks finished a record-setting week higher. Consumers are in a far worse mood

Wall Street closed out a record-setting week on the front foot on Friday. All three major indexes rose, with the blue-chip Dow leading, even though the latest read on American households showed confidence sliding and inflation worries creeping higher. Bond yields barely moved, oil went nowhere after Thursday's spike, and gold had its strongest session in more than a month.

At the close, the S&P 500 had gained 46.18 points, or 0.59%, to 7,811.54. It was the index's first advance since it set an all-time high three sessions earlier. The Dow Jones Industrial Average rose 423.31 points, or 0.83%, to 51,654.95, and the Nasdaq Composite added 172.83 points, or 0.64%, to 27,366.17. Each of the three benchmarks finished the week higher, according to Kiplinger.

The Dow did the heavy lifting

The Dow's lead over the other two indexes stood out. The 30-stock average tilts toward industrial and financial companies, while the Nasdaq leans on the large technology names that have driven much of this year's gains. On Friday the old-economy side of the market carried more of the load, a day after a report on OpenAI's revenue knocked chip stocks lower.

Not every corner of the market joined in. The three largest US wireless carriers posted double-digit losses after SpaceX laid out plans to compete in mobile service, while cell-tower owners rallied sharply on the same news. That split is covered in detail elsewhere in this edition.

Households grew gloomier

The day's main economic release pointed in the opposite direction from stocks. The University of Michigan's preliminary consumer sentiment index for October fell to 46.3 from 48.1 in September, a 3.7% monthly decline and 13.6% below a year earlier. PNC Economics noted that the reading came in under its own forecast of 47.8 and marked a third straight monthly drop.

The weakness was concentrated in how people feel about the present. The current conditions index fell to 44.7 from 50.9, while the expectations index edged up to 47.3 from 46.3. Surveys of Consumers director Joanne Hsu wrote that "buying conditions for durables plummeted amid high prices and borrowing costs," and that sentiment among lower-income consumers and those with smaller stock portfolios "dropped steeply" this month.

Inflation expectations are the part the Federal Reserve watches most closely. Year-ahead expectations rose to 4.7% from 4.6%, and long-run expectations rose to 3.5% from 3.4%. Both increased for a second straight month and are now at their highest since May. The survey noted that the year-ahead figure was 3.4% in February, before the Iran conflict began. Final October figures are due on Oct. 23.

Yields steady, rate-hike bets intact

Treasuries were calm by the standards of recent weeks. The 10-year yield ended near 5.25%, up about a basis point on the day, according to Tradeweb data cited by The Wall Street Journal, and the 30-year yield was little changed near 5.60%. Earlier in the week the 10-year and 30-year yields touched about 5.365% and 5.733%, their highest levels in roughly 24 years, before well-received 10-year and 30-year auctions helped pull them back.

The shorter end moved more. The 2-year yield, which tracks expectations for Fed policy most closely, rose more than 4 basis points to about 4.80%, according to the same data.

Futures pricing still points to more tightening. On Friday morning, CME's FedWatch tool showed about a 19% chance of a rate increase at the Fed's October meeting and about an 84% probability of at least one quarter-point hike by December, Reuters reported. Money markets were pricing three rate increases over the next 12 months, the Journal reported, citing LSEG data. Fed Governor Christopher Waller said on Thursday that further hikes could be needed but might not come right away.

Oil paused, gold rallied

Crude spent Friday digesting Thursday's 4% jump. President Donald Trump said the US would not attack Iran before the Nov. 3 midterm elections and described talks with Tehran as productive, which eased supply fears. Production shut in along the Gulf Coast by Hurricane Isaias limited the selling, according to FXEmpire, which reported that December Brent settled up a penny while November WTI gave back less than a quarter. WTI had settled at $91.49 on Thursday.

Gold did most of the moving among commodities. Front-month Comex gold rose $59.20, or 1.43%, to settle at $4,191.00 an ounce, its largest one-day gain since Sept. 3, according to Dow Jones Market Data. The metal gained 1.39% for the week, snapping a two-week losing streak, though it remains about 21% below its January record of $5,318.40. Reuters attributed the move to cooler oil prices and a softer dollar.

What carries into next week

The next major test is the September consumer price index, due on Wednesday. It is one of the last big inflation readings before the Fed's next policy decision, and it will land in a market that has spent the week weighing record stock prices against bond yields near multi-decade highs and households that say prices are wearing them down.

Friday's session showed buyers still willing to step in after a two-day pullback. Whether that holds will depend in part on whether the inflation data confirms what consumers told the Michigan survey this month.