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NEW YORK (Reuters) - U.S. consumer sentiment fell unexpectedly this month on persistent worries that the "dismal" state of personal finances would not recover quickly from the worst recession in decades, a report showed on Friday.
* The Reuters/University of Michigan Surveys of Consumers said its preliminary index of sentiment for October fell to 69.4, from September's 73.5.
* That was below economists' median expectation of a steady reading of 73.5, according to a Reuters poll.
* The report said diverging prospects for the general economy and personal finances would have a negative impact on the pace of the recovery, with consumers eager to increase their savings and pay down debts.
DOUG ROBERTS, CHIEF INVESTMENT STRATEGIST, CHANNEL CAPITAL RESEARCH.COM, SHREWSBURY, NEW JERSEY:
"Right now what you are seeing is there is a euphoria that's been building, so it's still good, but now basically, there is a certain amount of skepticism of it. A lot of this is based off what I call the government trade. Which is everybody thinks that all the government programs are going to make everything fine, and now they are starting to see chinks in the armor as it comes in. But the big thing is what you are seeing in the sentiment numbers is that they are hovering and not deteriorating substantially. If they hover at this level it's still pretty good."
DANIEL PENROD, SENIOR INDUSTRY ANALYST, CALIFORNIA CREDIT UNION LEAGUE, ONTARIO, CALIFORNIA:
"The drop in consumer sentiment was more than expected and highlights a bit of a disconnect from the views on Wall Street. Wall Street has seen a climb to 10,000 on the Dow while here on Main Street there's still a lot of concern. We've seen savings increase significantly while the lending and borrowing side has not increased. That indicates that the consumer still has a kind of bunker mentality. This does not bode well heading into the holiday season. The likelihood is this will dampen expected holiday sales."
CONRAD DEQUADROS, SENIOR ECONOMIST, RDQ ECONOMICS, NEW YORK:
"It was a surprise that it came in lower, but we are not looking for the consumer to be a big driver of this recovery. What this is showing is that because the labor market has not really recovered to the same degree as other areas of the economy like manufacturing, the consumer is not participating in this recovery as much as the manufacturing sector. We had very strong industrial production data this morning but the labor market remains quite weak, although not as weak as it was six months ago. It is probably disappointment among consumers that we are not seeing the recovery in employment as much as one would hope."
SHAUN OSBORNE, CHIEF CURRENCY STRATEGIST, TD SECURITIES,TORONTO:
"It's not a particularly good report as we saw a big drop in the outlook. It's a case of poor data hurting equities but supporting the dollar in a risk-off and risk-on mentality. We may see euro/dollar drift back down to $1.4840-50, but I don't see the dollar strengthening that much. It's the end of the week and people are taking profits. But the underlying theme is still dollar weakness."
ROBERT BRUSCA, CHIEF ECONOMIST, FACT AND OPINION ECONOMICS, NEW YORK:
"This is pretty surprising that we are seeing some backtracking in consumer sentiment. We've seen some pretty big drops in jobless claims and continued claims. We also have a better non-manufacturing ISM this month. There have been some progress with some of recent data."
"Is the economy really stepping back? At the face of it, it's not a good report for spending and the consumer."
ROB STEIN, MANAGING PARTNER, ASTOR ASSET MANAGEMENT, CHICAGO:
"In general, I don't put a lot of credence into sentiment numbers because they're misleading. But regardless of what people who answer phone surveys during the day say, we're not in a full-on bull market. We're bouncing around levels of normalized valuation that are just higher than they were before. We're going to consolidate at lower levels soon. We'll decline a little, and that should be the pattern for the next three to nine months.
"So far, the earnings season is spotty, which is what we were expecting. The ones who are doing good are doing great, and the other ones are disappointing. The companies who are surviving in this environment are going to thrive, while the rest will be challenged.
"I think we'll see a consolidation next week. This past week, the financial sector was the driver of hope and optimism, with people saying, guess what? The market, economy and results are all a little better than expected. But that's not the type of news or data to give you a prolonged bull market."
MARKET REACTION: STOCKS: U.S. stock indexes fell to session lows. BONDS: U.S. Treasury debt prices remained in a range. DOLLAR: U.S. dollar rose against the euro.