Tag Archives: Stock Market

Dollar slips on fears over U.S. tax reform troubles

Dollar slips on fears over U.S. tax reform troubles

By Jemima Kelly and Polina Ivanova

LONDON (Reuters) – The dollar slipped to a one-week low against the yen on Wednesday, weighed down by worries over possible delays to Donald Trump’s tax reform plans, evidence of the U.S. president’s waning popularity as well as lower Treasury yields.

The Washington Post, citing unidentified sources, reported on Tuesday that Senate Republican leaders are considering a one-year delay in the implementation of a major corporate tax cut to comply with Senate rules.

Any potential delay in the implementation of tax cuts, or the possibility of proposed reforms being watered down, would tend to work against the U.S. currency, analysts said.

The so-called “Trumpflation trade” – bets that Trump’s policies would boost growth and inflation, meaning a faster pace of interest rate hikes from the U.S. Federal Reserve – had driven the dollar to 14-year highs in the aftermath of his election, and 10-year U.S. Treasury yields to their highest since 2014 at more than 2.6 percent <US10YT=RR>.

They, and the dollar, have since fallen back.

There had been some talk of a revival of the Trumpflation trade, with the greenback rising to a 3-1/2-month high against a basket of currencies <.DXY> last month after the U.S. Senate approved a budget blueprint for tax reform.

But the latest report fed doubts over whether Trump could indeed push that program through.

“Fed rate expectations and the news flow regarding..tax reforms are two key elements in terms of the dollar’s performance,” said Jeremy Stretch, head of G10 foreign exchange strategy at CIBC Capital Markets in London.

“We have seen rate support for the dollar in terms of U.S. yields diminishing…so I think that’s certainly limiting dollar gains and keeping the dollar index away from … recent highs,” he added.

The dollar was last down 0.4 percent at 113.52 yen <JPY=>, its weakest so far this month, falling from an eight-month high of 114.735 touched on Monday.

It was also down 0.1 percent against its basket at 94.870 and down 0.1 percent against the euro, which was trading at $1.1591 <EUR=>.

“If the story is true that they’re considering a delay of one year to the corporate tax cut,…big differences (among members of Congress) will need to be sorted, so we continue to be dubious on that proceeding,” said MUFG’s European head of global markets research in London, Derek Halpenny.

Halpenny added that a Wall Street Journal poll on Tuesday showing Trump’s approval rating falling sharply, even in counties that had voted for him, was adding to a picture of an increasingly unpopular president, which could potentially embolden members of Congress to oppose his plans and further weaken the dollar.

(Reporting by Jemima Kelly and Polina Ivanova in London; Additional reporting by Shinichi Saoshiro in Tokyo; Editing by Emelia Sithole-Matarise)

World stocks index dips after breaking record, oil near 2-1/2-year high

World stocks index dips after breaking record, oil near 2-1/2-year high

By David Randall

NEW YORK (Reuters) – A global rally in stocks paused on Tuesday, halting a nine-day advance that had sent the most widely tracked index of world stock markets to record highs.

All three of Wall Street’s major indexes dipped in U.S. afternoon trading, sending the MSCI 47-country ‘All World’ index <.MIWD00000PUS> down slightly after it had hit record highs above 500 points after Japan’s Nikkei <.N225> notched its best level since 1992 and Germany’s DAX <.GDAXI> scored a record high. The index is up nearly 20 percent for the year to date.

“You’ve had almost a perfect backdrop for equities,” said Pictet Asset Management’s global strategist Luca Paolini. “You have acceleration in nominal growth, earnings are between 10-15 (percent higher) globally and whatever you look at is pretty much in double digits.”

After hitting all-time highs shortly after the opening bell, the Dow Jones Industrial Average <.DJI> fell 11.21 points, or 0.05 percent, to 23,537.21, the S&P 500 <.SPX> lost 2.8 points, or 0.11 percent, to 2,588.33 and the Nasdaq Composite <.IXIC> dropped 24.31 points, or 0.36 percent, to 6,762.13.

Financial stocks <.SPSY> led the U.S. market lower, with the S&P 500 financial sector losing 1.2 percent, the largest decline of any sector. U.S. Treasury yields hit a two-week low.

Oil prices fell slightly after posting the biggest rise in six weeks following the Saudi crown prince’s move to tighten his grip on power and crank up tensions between the kingdom and Iran.

U.S. crude <CLcv1> fell 0.28 percent to $57.19 per barrel and Brent crude futures <LCOcv1> were last at $63.73, down 0.84 percent after touching a peak of $64.65.

The dollar was also on the move amid signs of more change at the Federal Reserve, while President Donald Trump’s Republican party pushes ahead with its tax cut program.

The dollar index <.DXY> rose 0.24 percent, with the euro <EUR=> down 0.28 percent to $1.1576 – the single currency’s lowest since mid-July. The Japanese yen weakened 0.23 percent to 113.97 per dollar <JPY=>, while sterling <GBP=> was last trading at $1.3153, down 0.13 percent on the day.

The Mexican peso lost 0.83 percent to 19.17 pesos to the U.S. dollar <MXN=>. The Canadian dollar <CAD=> fell 0.61 percent versus the greenback at C$1.28 per dollar.

Benchmark 10-year notes <US10YT=RR> last rose 2/32 in price to yield 2.3127 percent, from 2.32 percent late on Monday.

The 30-year bond <US30YT=RR> last rose 12/32 in price to yield 2.7778 percent, from 2.796 percent late on Monday.

Germany’s 10-year bond yields <DE10YT=RR> held near two-month lows at 0.338 percent after the European Central Bank firmed up its plans to reinvest the proceeds of its 2.5 trillion euro stimulus program. [GVD/EUR]

(Reporting by David Randall; Editing by Dan Grebler and James Dalgleish)

U.S. tax plan hopes lift stocks, strengthen dollar

U.S. tax plan hopes lift stocks, strengthen dollar

By Chuck Mikolajczak

NEW YORK (Reuters) – World stocks and bond yields rose and the U.S. dollar strengthened on Friday, as investors anticipated President Donald Trump could make progress on his fiscal plans after the U.S. Senate approved a budget blueprint that paves the way for tax cuts.

U.S. Republican Senator Rand Paul appeared to back the administration’s sweeping tax cut plan, saying he was “all in” for massive tax cuts, even as the Senate passed a key budget measure without his support one day earlier.

Equities rose on Wall Street, with financials &lt;.SPSY&gt;, which are expected to benefit from the administration’s proposed policies, up 1.16 percent as the best performer of 11 major S&amp;P sectors.

“It clearly is a positive and has added to the sentiment,” said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.

“Any legislative action that promotes economic growth, clearly will be additive to not only sentiment but presumably earnings.”

Housing stocks &lt;.HGX&gt; also moved higher, up 0.73 percent, after data from the National Association of Realtors showed U.S. home resales unexpectedly increased in September.

But gains were curbed by declines in Celgene &lt;CELG.O&gt;, off 10.04 percent after the company said it would abandon drug trials for a Crohn’s disease treatment.

General Electric &lt;GE.N&gt; also lagged, down 0.30 percent after its third-quarter results and forecast cut.

The Dow Jones Industrial Average &lt;.DJI&gt; rose 134.39 points, or 0.58 percent, to 23,297.43, the S&amp;P 500 &lt;.SPX&gt; gained 11.47 points, or 0.45 percent, to 2,573.57 and the Nasdaq Composite &lt;.IXIC&gt; added 33.14 points, or 0.5 percent, to 6,638.20.

The dollar index &lt;.DXY&gt;, tracking the greenback against a basket of major currencies, rose 0.44 percent, with the euro &lt;EUR=&gt; down 0.6 percent to $1.1779.

Bets that Trump’s planned tax cuts, infrastructure spending and other pro-business measures would push up growth and inflation had been behind a reflation trade that propelled the dollar to 14-year highs earlier this year.

European shares rebounded from their worst day in two months, also helped by well-received earnings reports for Volvo and Ericsson and high German producer-price inflation numbers.

The pan-European FTSEurofirst 300 index &lt;.FTEU3&gt; rose 0.24 percent. MSCI’s world equity index &lt;.MIWD00000PUS&gt;, which tracks shares in 47 countries, gained 0.10 percent, just shy of a record intraday high.

The Senate budget resolution also sent U.S. Treasury yields higher, with two-year yields reaching a near nine-year high, as investors reduced bond holdings on worries about more inflation and federal borrowing.

Benchmark 10-year notes &lt;US10YT=RR&gt; were last down 17/32 in price to yield 2.3809 percent, from 2.321 percent late on Thursday.

The increased risk appetite also sent gold lower. Spot gold &lt;XAU=&gt; dropped 0.8 percent to $1,279.08 an ounce. U.S. gold futures &lt;GCcv1&gt; fell 0.74 percent to $1,280.50 an ounce.

U.S. crude &lt;CLcv1&gt; rose 0.23 percent to $51.63 per barrel and Brent &lt;LCOcv1&gt; was last at $57.49, up 0.45 percent. Still, oil was set for a weekly loss as investors sought to book profit, despite tensions in the Middle East that have slashed supplies of crude.

 

(Additional reporting by Sruthi Shankar; Editing by James Dalgleish)

 

Dow, S&P 500 eke out record highs, turn up after Fed Powell report

Dow, S&P 500 eke out record highs, turn up after Fed Powell report

By Caroline Valetkevitch

NEW YORK (Reuters) – The Dow and S&P 500 eked out record closing highs on Thursday, turning higher at the last minute after a Politico report that Federal Reserve Governor Jerome Powell is the leading candidate for the nominee for Fed chair.

Investors have been anxious to hear who President Donald Trump will pick as the nominee. A decision like Powell would likely be a continuation of the current stock market-friendly monetary policy that has helped fuel the market’s more than eight-year bull run.

Stocks had been recovering from early losses for much of the afternoon but the S&P 500 and Dow were still a tad lower just before the Powell report.

“Clearly at the end it had everything to do with the speculation about Jerome Powell,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. “I can’t observe any other reason for why we ended up.”

“He’s viewed to be sort of an extension of (current Fed Chair) Janet Yellen by way of being a policy dove … and, with the market loving more of the same with regard to uber-accommodative monetary policy, as more welcome than the alternative,” he said.

Powell was among several names circulating as possible picks, including Yellen. Others include Trump’s chief economic adviser, Gary Cohn, former Fed Governor Kevin Warsh and Stanford University economist John Taylor.

The White House on Wednesday said Trump will announce his decision on the matter in the “coming days.”

Tech shares were among the day’s biggest drags, led by Apple <AAPL.O>, which fell 2.4 percent in its biggest daily percentage decline since Aug. 10 as doubts about its double 2017 iPhone release strategy weighed on investors.

The Dow Jones Industrial Average <.DJI> rose 5.44 points, or 0.02 percent, to end at 23,163.04, the S&P 500 <.SPX> gained 0.84 point, or 0.03 percent, to 2,562.1 and the Nasdaq Composite <.IXIC> dropped 19.15 points, or 0.29 percent, to 6,605.07.

Stocks have posted a string of record highs in recent weeks, and the Dow closed above 23,000 for the first time on Wednesday.

The day also marked the 30th anniversary of the 1987 Black Monday stock market crash. Most traders see a repeat of the crash as unlikely because of modern trading technology and other changes.

Investors also took profits in the broader tech sector, which has had a strong run so far this year, gaining about 30 percent and helping drive the market’s recent record run. The tech index <.SPLRCT> was down 0.4 percent on the day.

Weighing on the market early as well was some disappointing news on the earnings front.

United Airlines <UAL.N> tumbled 12.1 percent, weighing on other airlines stocks after the third-largest U.S. carrier’s profit fell due to flight cancellations during the hurricane season. American Airlines <AAL.O> fell 1 percent.

Shares of eBay <EBAY.O> were down 1.8 percent a day after it reported results.

Advancing issues outnumbered declining ones on the NYSE by a 1.04-to-1 ratio; on Nasdaq, a 1.33-to-1 ratio favored decliners.

About 5.8 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

(Reporting by Caroline Valetkevitch in New York; Editing by Nick Zieminski and James Dalgleish)

Dow tops 23,000-mark for the first time on strong earnings

Dow tops 23,000-mark for the first time on strong earnings

By Sruthi Shankar

(Reuters) – The Dow Jones Industrial Average breached the 23,000-mark for the first time on Tuesday, powered by strong earnings from UnitedHealth and Johnson & Johnson.

The blue-chip index has surpassed four similar 1,000-point milestones this year, indicating investor faith in the bull-run despite lofty stock valuations.

The broader market, however, was weighed down by losses in industrial, financial and technology stocks.

Shares of the largest U.S. health insurer <UNH.N> touched a life high, rising as much as 5.83 percent, after the company reported a stronger-than-expected profit and raised its full-year earnings forecast.

That, along with a 2.6 percent rise in Johnson & Johnson <JNJ.N>, led a 1 percent gain in the S&P healthcare sector <.SPXHC>.

Goldman Sachs <GS.N> dipped 2.07 percent despite reporting a profit beat and smaller-than-expected trading revenue fall. Morgan Stanley <MS.N> rose 0.92 percent as its wealth management business insulated the bank from weakness in trading revenue.

“There was some good earnings, real good economic data in spite of the hurricanes,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

“We’re not seeing a market that’s galloping along here. The market from a technical perspective is tired. What you’re seeing is some hesitancy but not any major declines.”

Treasury yields and dollar gained after a report that U.S. President Donald Trump was impressed by his meeting with economist John Taylor, who is considered to favor higher interest rates than current Federal Reserve Chair Janet Yellen.

The equity market, however, was not impacted by a report that Trump is likely to announce his choice before going to Asia in early November.

At 12:33 a.m. ET, the S&P 500 <.SPX> was down 1.1 points, or 0.04 percent, at 2,556.54 and the Nasdaq Composite <.IXIC> was down 2.98 points, or 0.05 percent, at 6,621.02.

The Dow Jones Industrial Average <.DJI> was up 19.47 points, or 0.08 percent, at 22,976.43, after briefly hitting the 23,000 mark, when only eight of its 30 components were making gains.

Nine of the 11 major S&P indexes were lower, led by a 0.42 percent drop in industrials <.SPLRCI> index.

General Electric’s <GE.N> 1.15 percent fall led losses in the industrial sector, while drop in shares of Microsoft <MSFT.O> and Intel <INTC.O> weighed on the tech sector.

Netflix <NFLX.O> slipped 1.15 percent after touching a record high as more subscribers signed up for its popular original content in the latest quarter.

(ht Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)

Wall Street at new record highs as tech, auto advance

A trader works inside a stall on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 3, 2017. REUTERS/Brendan McDermid

By Ankur Banerjee and Gayathree Ganesan

(Reuters) – All the three main U.S. stock indexes hit fresh record highs on Tuesday, buoyed by a rally in tech stocks and gains in Ford Motor <F.N> and General Motors <GM.N> after the carmakers reported strong September sales.

Seven of the 11 major S&P indexes were higher, led by technology <.SPLRCT> and consumer discretionary <.SPLRCD> sectors.

Major automakers posted higher U.S. new vehicle sales in September, as consumers in hurricane-hit parts of the country rushed to replace flood-damaged cars.

However, the market traded in a narrow range as investors awaited upcoming quarterly earnings from big names to help justify the lofty valuations.

Third-quarter earnings for S&P 500 companies are expected to increase 5.5 percent from a year earlier, according to Thomson Reuters research, after rising a better-than-expected 12.3 percent in the second quarter.

“Tech has been in leadership for the first nine months of this year,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.

The sector is stabilizing as seasonal rotation ends and investors are looking at the stocks as opportunities now, he said.

The markets have been scaling new highs and on Monday found support from factory data that pointed to underlying strength in the U.S. economy.

The encouraging data helped world shares touch their latest record highs on Tuesday, while lifting the dollar to its loftiest in 1-1/2 months.

“The first two days of October seem to be a continuation of what happened in the last two weeks of September … we’re gradually grinding higher in the month of October,” said Hogan.

At 11:07 a.m. EDT, the Dow Jones Industrial Average <.DJI> was up 61.05 points, or 0.27 percent, at 22,618.65, while the S&P 500 <.SPX> was up 0.97 points, or 0.04 percent, at 2,530.09.

The Nasdaq Composite <.IXIC> was up 3.25 points, or 0.05 percent, at 6,519.97.

General Motors’ shares rose 3.7 percent to a record high of $43.32 in morning trading, while Ford’s stock was up 2.05 percent at $12.34.

But rival Tesla Inc <TSLA.O> was down 2 percent after the luxury electric vehicle maker said its planned ramp-up for the new Model 3 mass-market sedan faced production bottlenecks.

Lennar Corp’s <LEN.N> shares rose about 3 percent following a higher-than-expected quarterly profit from the No.2 U.S. homebuilder.

Declining issues outnumbered advancers on the NYSE by 1,455 to 1,286. On the Nasdaq, 1,368 issues rose and 1,358 fell.

(Reporting by Ankur Banerjee in Bengaluru; Editing by Sriraj Kalluvila)

Dollar set for best week of 2017, stocks near records

FILE PHOTO: U.S. dollar notes are seen in this November 7, 2016 picture illustration. REUTERS/Dado Ruvic/Illustration/File Photo

By Lewis Krauskopf

NEW YORK (Reuters) – The dollar was headed for its strongest week of the year on Friday, while world stock markets climbed back near record-high levels on the last trading day of the quarter.

Firming expectations for another U.S. interest rate increase by year-end, combined with U.S. President Donald Trump’s tax-cut plan, have dominated markets for most of the week.

Data on Friday showed U.S. consumer spending barely rose in August but the report did little to change expectations that the Federal Reserve would raise interest rates again in December. Another report showed the Chicago purchasing management index, which gauges factory activity, came in better-than-expected for September.

“The economic data we got was either on target or it was slightly better than expected so there wasn’t anything negative at all to put a pause on things,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

“Generally, the overall economic backdrop is very solid. In a bull market when you don’t have bad news you tend to get up moves in the market,” Frederick said.

The Dow Jones Industrial Average <.DJI> fell 18.29 points, or 0.08 percent, to 22,362.91, the S&P 500 <.SPX> gained 4.93 points, or 0.20 percent, to 2,514.99 and the Nasdaq Composite <.IXIC> added 31.99 points, or 0.5 percent, to 6,485.44.

The S&P technology sector <.SPLRCT> led the way, rising 0.6 percent.

The S&P 500 had set a record closing high on Thursday.

The pan-European FTSEurofirst 300 index <.FTEU3> rose 0.34 percent and MSCI’s gauge of stocks across the globe <.MIWD00000PUS> gained 0.34 percent.

The MSCI global index was within 0.5 percent of an all-time high and on pace for its 11th consecutive positive month.

The dollar index <.DXY> was flat. The greenback was up about 1 percent for the week, on track for its best week since December.

“What you have seen is a general closing out of some short dollar positions but for that to be sustained we need greater detail on Trump’s fiscal plans and see it going through,” said James Binny, head of currency portfolio management for EMEA at State Street Global Advisors.

The euro <EUR=> was up 0.29 percent to $1.1818.

Benchmark 10-year notes <US10YT=RR> last fell 4/32 in price to yield 2.3193 percent, from 2.307 percent late on Thursday.

U.S. crude <CLcv1> fell 0.23 percent to $51.44 per barrel and Brent <LCOcv1> was last at $56.88, down 0.49 percent on the day.

Spot gold <XAU=> dropped 0.2 percent to $1,284.52 an ounce.

(Additional reporting by Abhinav Ramnarayan and Saikat Chatterjee in London; Editing by Andrew Bolton and Nick Zieminski)

Wall Street falls more than 1 percent on rising North Korea worries

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 5, 2017. REUTERS/Brendan McDermid

By Sruthi Shankar

(Reuters) – The three major Wall Street indexes fell more than 1 percent on Tuesday and were on track to mark their worst single-day fall in nearly three weeks, weighed down by mounting tensions on the Korean peninsula.

North Korea on Sunday conducted its sixth nuclear test, which it said was of an advanced hydrogen bomb for a long-range missile, marking a dramatic escalation of the regime’s stand-off with the United States and its allies.

South Korea’s Asia Business Daily, citing an unidentified source, reported that North Korea had moved what looked like an intercontinental ballistic missile towards its west coast, possibly in preparation for a launch.”It looks as though escalation has gone to the next level, but there are lot of things in the coming weeks that may be causing people to get a little bit more cautious,” said Randy Frederick, vice president of trading and derivatives for Charles Schwab in Austin, Texas.

Wall Street may face a rough ride in September, typically the worst month for stocks, if there is a showdown in Washington over the U.S. budget and the federal debt ceiling.

The CBOE Volatility index <.VIX>, Wall Street’s fear gauge rose 3.26 points to 13.39 and was on track to close higher for the first time in four days.At 12:41 p.m. ET (1641 GMT), the Dow Jones Industrial Average <.DJI> was down 239.61 points, or 1.09 percent, at 21,747.95 and the S&P 500 <.SPX> was down 24.8 points, or 1 percent, at 2,451.75. The Nasdaq Composite <.IXIC> was down 85.79 points, or 1.33 percent, at 6,349.54.

Nine of the 11 major S&P sectors were lower. Financial stocks <.SPSY> were the worst hit, putting them on track for their biggest one-day fall since mid-May, after an influential Federal Reserve policymaker struck a dovish tone on interest rates.

Fed Governor Lael Brainard said U.S. inflation is falling “well short” of target so the central bank should be cautious about raising interest rates any further until it is confident that prices are headed higher.

Goldman Sachs’ <GS.N> fell 3.3 percent, dragging down the Dow; while the S&P was pulled lower by a more than 2 percent fall in shares of JPMorgan <JPM.N> and Bank of America <BAC.N>.

Shares of United Technologies <UTX.N> were down 4.49 percent after Boeing <BA.N> said on Tuesday it would look closely at United’s $23 billion buy of Rockwell Collins <COL.N>. Boeing was down 1.2 percent and Rockwell inched up 0.5 percent.

Insmed <INSM.O> shares more than doubled after the company said its drug for the treatment of a rare and serious lung disorder met the main goal in a late-stage study.

Declining issues outnumbered advancers on the NYSE by 2,132 to 722. On the Nasdaq, 2,053 issues fell and 812 advanced.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva)

U.S. consumer confidence hits five-month high; house prices rise

A 'for sale' is seen outside a single family house in Garden City, New York, U.S., May 23, 2016. REUTERS/Shannon Stapleton/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S consumer confidence surged to a five-month high in August as households grew increasingly upbeat about the labor market while house prices rose further in June, suggesting a recent acceleration in consumer spending was likely to be sustained.

The data on Tuesday also supported views that economic growth would accelerate in the second half of the year after a sluggish performance earlier.

“Despite a daily dose of worrying headlines, consumers still have plenty to be confident about right now. Home prices are rising, stocks are just off record highs and the labor market is churning out jobs,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto. “That should continue to support solid consumer spending growth through the rest of the year.”

The Conference Board said its consumer confidence index increased to a reading of 122.9 this month from 120.0 in July. That was the strongest reading since March when the index hit a 16-year high of 124.9. August was also the second highest reading since 2000.

The survey’s so-called labor market differential, derived from data about respondents who think jobs are hard to get and those who think jobs are plentiful, was the best in 16 years.

This measure closely correlates to the unemployment rate in the Labor Department’s employment report and is consistent with further absorption of labor market slack. The labor market is near full employment, with the unemployment rate at 4.3 percent.

Strong consumer confidence bodes well for consumer spending, which accelerated in the second quarter after slowing at the start of the year. It also provides a boost to the economy after it grew 1.9 percent in the first half of the year.

The dollar pared losses against a basket of currencies on the data. Prices for U.S. Treasuries were little changed after earlier rising on safe-haven buying after North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea. Stocks on Wall Street were marginally lower.

BULLISH CONSUMERS

Economists said bullish consumer optimism, together with the tightening labor market, were compelling reasons for the Federal Reserve to increase interest rates again this year despite worries about persistently low inflation.

“Consumers seem very confident in their ability to find a new job. They also are becoming more bullish on the outlook for stock prices even as the market holds near record highs,” said John Ryding, chief economist at RDQ Economics in New York.

“The Fed has put significant weight on consumer confidence in forming its views on the economy and, from that perspective, this report supports further rate increases.”

The U.S. central bank has raised rates twice this year. Economists expect the Fed will announce a plan to start reducing its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities in September and hike rates in December.

The Conference Board survey showed consumers mildly upbeat about their short-term income prospects. The percentage of consumers expecting an improvement in their income rose slightly to 20.9 percent this month from 20.0 percent in July. The share expecting a drop fell to 7.8 percent from 9.5 percent in July.

Despite being near full employment, the labor market has struggled to generate strong wage growth, a frustration for both consumers and policymakers.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of house prices in 20 metropolitan areas rose 5.7 percent in June on a year-over-year basis after a similar increase in May.

An acute shortage of homes on the market and strong demand are pushing up house prices. While rising house prices are boosting equity for homeowners, the dearth of properties is hurting home sales.

“Tight market conditions will drive house prices higher over the remainder of the year, although cautious appraisals and tougher mortgage lending regulations will act to prevent a dangerous house price boom,” said Matthew Pointon, an economist at Capital Economics in New York.

(Reporting by Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)

U.S. consumer sentiment rises to seven-month high: University of Michigan

A shopper walks down an aisle in a newly opened Walmart Neighborhood Market in Chicago in this September 21, 2011 file photo. REUTERS/Jim Young/Files

(Reuters) – U.S. consumer sentiment improved to its strongest level in seven months in early August, reflecting confidence in the outlook for the economy and in personal finances as the U.S. stock market holds near record highs, a key survey showed on Friday.

The University of Michigan’s consumer sentiment index rose to 97.6 in the first half of August from 93.4 the month before, which was an eight-month low. The result exceeded expectations for a reading of 94, according to a Reuters poll.

Whether that optimism holds in the weeks ahead, however, is a major question following recent events stemming from a white nationalist rally in Charlottesville, Virginia, said Richard Curtin, chief economist for the University of Michigan’s Surveys of Consumers. There were not enough survey interviews conducted following the protests, in which one woman died as white nationalists clashed with counter-protesters, to assess how much the events might weaken sentiment.

Curtin said the backlash over Charlottesville and U.S. President Donald Trump’s response could weigh on subsequent survey readings.

Trump has blamed the Charlottesville violence on not just the white nationalist rally organizers but also the counter-protesters, and said there were “very fine people” among both groups. His remarks drew rebukes from Republican and Democrat lawmakers as well as business leaders and U.S. allies.

“The fallout is likely to reverse the improvement in economic expectations recorded across all political affiliations in early August,” Curtin said. “Moreover, the Charlottesville aftermath is more likely to weaken the economic expectations of Republicans, since prospects for Trump’s economic policy agenda have diminished.”

FALLOUT FROM CHARLOTTESVILLE

The private sector has reacted to Trump’s remarks as well. Earlier this week, several chief executives quit Trump’s two business advisory groups in protest, resulting in the president disbanding the groups altogether.

Moreover, speculation emerged that key officials, notably director of National Economic Council Gary Cohn, could resign due to Trump’s controversial comments.

Cohn is seen leading the White House’s effort on tax reform and is a front-runner to possibly succeed Janet Yellen as head of the U.S. Federal Reserve.

On Thursday, rumors on social media of Cohn resigning spurred a sell-off on Wall Street and buying of U.S. Treasury bonds — a safe-haven market instrument in times of uncertainty — as traders feared Trump’s economic agenda would stall.

CURRENT, FUTURE DIVERGE

The rebound in University of Michigan’s overall consumer reading in early August was due to a jump in the survey’s expectations component. It rose to 89.0 from 80.5 in July.

On the other hand, the survey’s current conditions measure fell to 111.0 from 113.4 in late July.

“I would say that the economy is in good shape and is not especially sensitive to the latest political buzz, but how much of a hit confidence takes remains to be seen,” Stephen Stanley, Amherst Pierpoint Securities’ chief economist, wrote in a research note.

(Reporting By Dan Burns; Editing by Meredith Mazzilli and Chizu Nomiyama)