Instant View: Consumer sentiment rises; home sales dip

NEW YORK (Reuters) - U.S. consumer sentiment rose to its highest level since June on tentative signs of improved job conditions, but single-family sales of new homes fell 8.1 percent in October, suggesting the recovery is still not helping the housing market.

CONSUMER SENTIMENT:

NEW HOME SALES:

KEY POINTS: * New U.S. single-family home sales fell unexpectedly in October and prices dropped to a seven-year low, a government report showed on Wednesday, pointing sustained weakness in the housing market following the end of a home-buyer tax credit. * The Commerce Department said sales dropped 8.1 percent to a 283,000 unit annual rate after an upwardly revised 308,000 unit pace in September. * Analysts polled by Reuters had forecast new home sales rising to a 310,000 unit pace in October. Compared to October last year, sales were down 28.5 percent. * The Thomson Reuters/University of Michigan's final November reading on the overall index on consumer sentiment was 71.6, up from 67.7 in October and also above November's preliminary reading of 69.3.

COMMENTS:

DANA JOHNSON, CHIEF ECONOMIST, COMERICA, DALLAS:

"Home sales are very weak, the only thing that takes away from the incredible weakness is that there are hardly any homes for sale, that keeps edging down, but its down to 202,000 units, which is by historical standards basically unprecedented. Other than that its extremely weak and I don't see any way to attribute it to the foreclosure issues, because the foreclosures turn up in the existing home sales.

"The headline sentiment number shows some improving confidence, that's not totally surprising, there is an idea of greater stability in the labor markets , stronger increases of private payrolls and also a downward drift in new claims.

"I think people are sensing that the labor market's a little better, I think the stock market increases helps as well.

"Everything in the economy is looking pretty good in the recent data with the major exception of the homes sales data, both new and existing and starts and permits, the whole housing sector is just lifeless at this point, in contrast to pretty general signs of strength in every other part of the economy."

DAVID COARD, HEAD OF FIXED INCOME SALES AND TRADING,

WILLIAMS CAPITAL GROUP, NEW YORK:

"The Michigan number is bigger than expected but it is likely not a big market mover.

"The housing number was a little weaker. Right now it seems like we may be getting a little bit of strength in the economy but there is still a question mark about whether the strength is going to accelerate and become self sustaining."

TERRY MORRIS, SENIOR VICE PRESIDENT AND SENIOR EQUITY MANAGER,

NATIONAL PENN INVESTORS TRUST COMPANY, READING, PENNSYLVANIA:

"(It) seems like there is a bias toward optimism. There is greater reason to be optimistic today than there was yesterday. At the very minimum it seems like we're stabilizing, not getting worse."

"As things improve there is less and less reason for the Fed to stimulate, so if it appears that we are stabilizing without their help then they are going to be reluctant to continue."

TIM HARDER, CHIEF INVESTMENT OFFICER AT PEAK CAPITAL INVESTMENT

SERVICES, DENVER, COLORADO:

"The consumer sector is actually one area that seems to be showing accelerating growth. Consumers are really picking up. The data was at the high end of consensus range and it was good but you had to sort of expect that considering how we got multiple confirmations that consumers are doing well over the past couple months. With the exception of the housing data, we are seeing a lot of good numbers today."

MICHELLE MEYER, SENIOR ECONOMIST, BANK OF AMERICA-MERRILL

LYNCH, NEW YORK

NEW HOME SALES: "Clearly this shows demand for newly-constructed homes remains depressed. Although we are seeing some improvement in jobs, unemployment has remained high. People are still worried about job security and will stay on the sidelines. The credit environment is still tight with the securitization market still broken."

THOMSON REUTERS/U. MICHIGAN CONSUMER SURVEYS: "While it's ticked up, it is still in recession levels. Consumers have seen some improvement in job prospects. The holiday shopping season should be decent relative to the past two years. As consumers look for discounts and deals, consumer spending could end up falling in the first quarter of next year."

BRIAN BATTLE, VICE PRESIDENT OF TRADING AT PERFORMANCE TRUST

CAPITAL PARTNERS, CHICAGO:

"It is always good to have a trend going your way, so the U Mich data is encouraging. It isn't a market mover, but it is nice. Durables were more important, and they were atrocious. Jobless data is also important, and they were encouraging. It's fine to be constructive on the market right now, but these really are mixed messages. But one thing we know for sure is that there's no inflation. We can just ignore inflation data for the next six months.

"Housing data is still coming in weak. It'll take years until we get some life in that market. There is still a big overhang, and there are only two ways to solve the inventory problem: time and prices. It's going to take both.

"A lot of the move in stocks today is a bounce-back after being down for two straight days. We were down for very real reasons, but this is just a covering back in of territory we lost. But ahead of a holiday I wouldn't put much stock into it. The volume is very light."

MARKETS: STOCKS: Stock indexes gained modestly BONDS: Bond prices were little changed FOREX: The dollar slipped slightly against the euro and yen