The preliminary May reading of the Thomson Reuters/University of Michigan consumer sentiment index skied to 83.7 from a 76.4 reading in April, besting economist predictions of a 78 mark on optimistic views of the future, lower gas prices and better housing market. The initial May reading represents the highest level of the index since July 2007, lifting stocks yet again on Friday to test new all-time highs.

The index, which is correlated to consumer spending and can be volatile, is pushing back near pre-recession levels, where it averaged 89 in the five years to the start of the recession in December 2007.

The current conditions index, a measure of how Americans view their personal finances, increased to 97.5 from 89.9 in April, marking the highest reading since October 2007. The biggest gains in the index came from respondents in the upper one-third of household income levels, perhaps because of the stock market rally that benefits affluent citizens that are typically more heavily invested in the markets.

Investors have been cheering equities as consumers seem to be shrugging-off higher payroll taxes and a series of government spending cuts known as the sequester. So far in 2013, the Dow Jones Industrial Average is up by 16.7 percent, the S&P 500 is ahead by 16.3 percent and the Nasdaq has risen 15.2 percent.

More respondents have a rosy view of the next six months, with the index of expectations climbing from 67.8 in April to 74.8 in May.

The reading on Friday is the first of two for the month. The preliminary reading is generated from a survey of about 300 consumers, while the final reading includes 500 respondents.

A report on Thursday from the Labor Department showed that inflation remained benign in April. The Consumer Price Index was lower by 0.4 percent compared to March, the biggest one-month drop in almost four years. In the 12 months to April, consumer prices only rose 1.1 percent, far below the 2.0-percent target of the Federal Reserve. The majority of the decline in April was attributed to an 8.1 percent nosedive in gasoline costs. Excluding the volatile energy and food sectors, the index rose just 0.1 percent compared to March and 1.7 percent compared to April 2012.

Last month, the National Association of Realtors reported that existing home sales fell by 0.6 percent in March from February to a seasonally adjusted rate of 4.92 million units. The pace was still 10.3 percent better than the prior March. The national median price of homes for sale was $184,300, up almost 12 percent from a year earlier. The April report of pre-owned home sales from the NAR is due next Wednesday. A report on April’s new home sales by the Commerce Department is coming on Thursday.

With the increase in consumer confidence, the markets are pushing again with the Dow up 56 points (after hitting a new intraday high at 15,305.44), the S&P 500 up by 7 points and the Nasdaq rising 16 points.

On the week, all three indices are looking to register gains of more than 1.2 percent and notch their fourth straight weekly advance.