INSTANT VIEW: U.S. March ISM index above expectations

NEW YORK (Reuters) - U.S. factory activity shrank in March, though at a slower pace than the previous month, according to an industry report released on Wednesday.

Pending sales of existing U.S. homes rose modestly in February but the market is still weak in the face of continued declines in home values and a recession, a realty trade group said on Wednesday.

KEY POINTS:

ISM MANUFACTURING INDEX: * The Institute for Supply Management said its index of national factory activity rose to 36.3 in March from 35.8 in February. * The reading was slightly above economists' median forecast for a reading of 36.0. * A reading below 50 indicates contraction in the sector. * ISM said the index has been below this level for 14 straight months.

PENDING HOME SALES: * The National Association of Realtors Pending Home Sales Index, based on contracts signed in February, was up 2.1 percent to 82.1 from an index of 80.4 in January. * Economists polled by Reuters ahead of the report were expecting pending home sales to rise by 1.0 percent.

COMMENTS:

CARY LEAHEY, SENIOR MANAGING DIRECTOR, DECISION ECONOMICS, NEW YORK:

"The numbers were on the positive side for the economy. The big one is the ISM manufacturing index, which was flat and the market is not going to get to excited about that, but the good news is that it does appear to be stabilizing over the last three months. So that is another sense that maybe the economy is at long last trying to make a bottom.

"You could argue that that is being supported by the other two pieces of data at 10 o'clock. Pending home sales, which is probably the least important of the sales figures, is still up substantially in February after a big decline in January, in yet another sign that perhaps the housing sector, which tends to lead the economy in bottoming before everything else does, may be bottoming as well."

VASSILI SEREBRIAKOV, CURRENCY STRATEGIST, WELLS FARGO, NEW YORK:

"There is a slight improvement in the ISM index. We've been off the lows for a few months, (but) I think it's really too early to say whether this is a sustained improvement. The reading is still deeply in recessionary territory.

"Construction spending is less of an important number, but also better than expected. I think there have been some indications of perhaps less weak economic data in recent months, but we think it's too early to predict a cyclical turnaround."

JACK BAUER, SENIOR ECONOMIST, MANNING & NAPIER, ROCHESTER, NEW YORK:

ISM: "It seems as if we are bouncing along the bottom. Things aren't improving but it doesn't look as if the situation is deteriorating."

PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:

"The March ISM manufacturing report was mildly encouraging because new orders look relatively strong. It's a fairly striking move up in the orders index. Some of that has to be for real. We're only 9 points away from a reading of 50 and a reading of 50 reflects stability. Optimists would see hints of a beginning of the end of the inventory correction. We could have a quick bounce back, but to a relatively low level because basic demand for manufactured goods is not strong."

MARKET REACTION: STOCKS: U.S. equity indexes trim losses after manufacturing, housing data. BONDS: U.S. Treasury debt prices little changed. DOLLAR: U.S. dollar holds steady versus yen.

DATA RELEASED EARLIER APRIL 1:

US private sector axes 742,000 jobs in March