The University of Michigan consumer sentiment survey showed a sharp monthly improvement, with the index climbing 13.2% from November. Part of the reason was a plunge in inflation expectations from 4.5% in November to 3.1% this month. The rise comes on the heels of November's stronger-than-expected jobs report.

Yahoo Finance's Brad Smith and Madison Mills break down the details.

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Video Transcript

BRAD SMITH: This morning here, we've got a fresh reading. And ultimately, the consumer sentiment has moved higher in the month of December. It's up by about 13.2% month over month here.

And this is particularly interesting because now you're getting, kind of, two parts of the Fed's calculus where we've gotten reports out this morning both on the employment situation front and now on the consumer sentiment front. And particularly, as we think about where consumer sentiment is going to continue to move from here, it's a larger question of, do they continue to see the jobs print that we got out this morning, and look at the employment situation, and see strength there to say, all right, well, we feel comfortable spending? And that's been the larger question that many of the economists that we've spoken with have brought up in our discussions as well.

MADISON MILLS: These inflation expectations, a huge headline here. One year views of inflation expectations dropping to 3.1% from 4.5%. Obviously, a hugely bullish indicator for the markets. That's why we're seeing a lot of green on your screen after there was a little bit of meh-meh following that jobs report.

But definitely, seeing some movement. A were so back narrative starting to come in to markets here. You're seeing the NASDAQ up 3/10 of a percent mirroring the S&P there. And the Dow up by 2/10 of a percent as well.