INSTANT VIEW: Consumer sentiment slips in July

NEW YORK (Reuters) - U.S. consumer sentiment soured in early July, slipping to its weakest since March, when confidence in the financial sector and economy were at a low ebb, the Reuters/University of Michigan Surveys of Consumers

survey showed on Friday.

KEY POINTS: * The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence for July fell to a reading of 64.6 from the final reading for June of 70.8. * July's preliminary reading was well below economists' median forecast for 70.5. The index of consumer expectations fell to 60.9 from June's final reading of 69.2. * The index of current economic conditions slipped to 70.4 from June's final reading of 73.2. * Consumers' escalating concerns about an extended economic downturn, job security and erosion of wealth were the main factors depressing sentiment, the survey showed.

COMMENTS:

JOHN RYDING, CHIEF ECONOMIST RDQ ECONOMICS, NEW YORK

"We thought that it would pull back a little bit. University of Michigan, on the expectations side, has been seen as reasonably influenced by equity price moves. Having had a good quarter, equities are down so far in July so we thought that would be a little bit of a subtraction.

"People have seen higher prices at the gas pump of late so we thought that also would be a drag. And we still think the labor market is a little troublesome for consumers.

"Having had a good run-up, we were looking for confidence to pull back and it pulled back somewhat more than we expected.

"I don't think that derails the recession-ending story. We think the recession came to an end in the second quarter but it is a little bit of a question mark on the part of consumers and we're just going to have to see how that plays out."

RUDY NARVAS, SENIOR ANALYST, 4CAST LTD, NEW YORK:

"You have some pretty uneven data coming in, you had a good trade balance report but then you come in with a consumer confidence report that is terrible. When you look at the breakdown -- the economic outlook and also conditions -- they both fell. It suggests that consumers still are sitting on shaky ground and are unsure of the economic prospects. Given the fact that we are going to see retail sales coming up, some of the preliminary data that we have seen suggests that consumers are still uneasy about going out to the mall and starting to buy goods again."

BILL SCHULTZ, CHIEF INVESTMENT OFFICER, MCQUEEN, BALL &

ASSOCIATES, BETHLEHEM, PENNSYLVANIA:

"When you look at this it reflects somewhat of the data we've seen all through the latter half of June and into this month, where consumers are still not completely comfortable with their prospects here going forward.

"They're still very nervous given the fact that joblessness may not be getting a lot worse, the degree of negativity may be slowing but you're still not seeing a lot of hiring going on, and they're really worried about how going forward their consumption gets reined in and their savings rate goes higher. You see that reflected in the bond market here with lower rates. People are putting more money away, and businesses as well, there's a retrenchment going on here.

"We really see a stopping of the job losses and quite frankly increase in the job hiring -- that's what consumers are

looking at to regain confidence and go out and spend again. We had a blurb up in the spring but we've seen this fade a little bit, which gives you concern about what happens going forward."

BRIAN DOLAN, SENIOR CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER,

NEW JERSEY:

"It underlines the ongoing gloom facing the U.S. consumer and further delays prospects for a near-term recovery. That will weigh heavily on risk sentiment, pushing stocks and yen crosses down and boosting the dollar.

"We made some interesting lows Wednesday and still need to see those taken out, but if the S&P goes below 870, it could be a problem, as it's a Friday in July, so things could accelerate. But keep in mind, everyone is expecting some recovery later this year, so there's still a latent bid for riskier assets that argues any pullback will be more subdued than it was when markets were in panic mode."

STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO IN GREENWICH,

CONNECTICUT:

"The data is weaker than expected, but it seems like a lot of the data we're seeing is trendless, after getting a bit of a bounce earlier. For the markets, if we look at sentiment when things are at an extreme, stocks tend to be near a bottom, when everyone is bearish, and near a top when everyone is bullish. It's backwards-looking in its focus.

"For stock prices, we're still considered mildly on the oversold level, so they may try and shrug this off sometime in the session, even though the initial reaction is negative."

GARY THAYER, SENIOR ECONOMIST, WELLS FARGO ADVISORS, ST. LOUIS,

MISSOURI:

"It's a little disappointing. Consumer sentiment is still better than what we saw at the lows last November, but the survey suggests that people are probably unhappy with the employment situation and the increase in energy prices we saw this spring."

MARKET REACTION: STOCKS: U.S. stock indexes fell. BONDS: U.S. Treasury debt prices rallied. DOLLAR: U.S. dollar was stronger against the yen, weaker against the euro.