NEW YORK (Reuters) - U.S. consumer confidence soared in May to its highest level in eight months as severe strains in the labor market showed some signs of easing, though Americans’ mood remained depressed by historical standards.
KEY POINTS: * The Conference Board, an industry group, said its index of consumer attitudes jumped to 54.9 in May from a revised 40.8 in April, the biggest one-month jump since April 2003. * The consensus forecast was for the index to rise to 42. Fewer Americans said jobs were “hard to get,” the survey found, with that measure slipping to 44.7 percent from 46.6 percent. Those saying jobs were plentiful climbed to a still meager 5.7 percent, but that was still higher than March’s 4.9 percent. * “Consumers are considerably less pessimistic than they were earlier this year,” said Lynn Franco, director of The Conference Board’s Consumer Research Center.
MELVIN HARRIS, MARKET STRATEGIST, ADVANCED CURRENCY MARKETS, NEW YORK:
“The consumer confidence number was tremendous. That’s a key piece for boosting risk appetite. I’m not totally sold on our being in full-blown rally mode again but I am leaning that way. There’s been so much talk about the AAA U.S. credit rating being downgraded, but to be honest, even if this happened -- and I don’t think it will -- the U.S. is not going to default. Neither is the UK. So that shouldn’t be the prompt to sell the dollar.
BRIAN DOLAN, CHIEF CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY:
“The pull-back in the euro to the $1.3860 area is being bought now, and the sharper-than-expected increase in U.S. consumer confidence plays into the idea that the situation is stabilizing. So you see the dollar and yen crosses getting sold. A lot of the consumer confidence is based on the stock markets having come back, and when you get higher confidence, stocks go up more and it builds upon itself. Still, the big story this week will be how the U.S. Treasury auctions are received.”
STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO, GREENWICH, CONNECTICUT:
“The data that’s coming out is refreshing. On the other hand stocks have mounted a 37 to 38 percent rally in anticipation the data would start to see an improvement.
“We are down 5 percent off the highs coming into this session, but I generally think stocks will continue in a consolidation phase over the next couple of weeks.”
KATHY LIEN, DIRECTOR OF CURRENCY RESEARCH, GFT FOREX, NEW YORK:
“With equities recovering, jobless claims easing and the Obama Administration rolling out more changes to benefit the average American, consumers have grown much more optimistic. The improvement in consumer confidence will mean that the pullback in currencies this morning is temporary. Traders are still looking to take on more risk at the expense of the dollar.”
DOUG BENDER, MANAGING DIRECTOR, MCQUEEN, BALL & ASSOCIATES, BETHLEHEM, PENNSYLVANIA:
“Consumer confidence was much higher than what they were expecting, but this has often been misleading. Follow what I do and not what I say: that’s what I’m a believer in.
“Treasuries have come off a bit.”
GARY THAYER, SENIOR ECONOMIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI:
“It’s a very encouraging number. Consumers are feeling a little better about the present situation, but feeling much better about expectations for the future. That’s in sharp contrast with what we saw last October when the ‘expectations’ index was lower than the ‘present situation’ number. The economy is not a lot better right now, but people are feeling that there’s light at the end of the tunnel.”
TODD CLARK, MANAGING DIRECTOR OF STOCK TRADING, NOLLENBERGER CAPITAL PARTNERS, SAN FRANCISCO:
“Huge number -- much higher than expected, obviously giving the market a good boost here. Basically the highest since September of last year. They were expecting 43, it came out at 54.9, so obviously the extent of that could help consumer spending and economic growth in general.”
PETER KENNY, MANAGING DIRECTOR AT KNIGHT EQUITY MARKETS, JERSEY CITY, NEW JERSEY:
“This is very positive, better than expected. I was looking for positive, but this is very solid. This is going to arrest any erosion we’ve seen in the rally.
“This comes on top of the fairly negative home pricing number, but what comes out on top in terms of momentum is consumer confident. It’s more relevant and closer to real time. Housing is more backward-looking.
“As is always been the case, regardless of how much the government feels it is in control, the consumer is the principal driver of world growth. They’re 70 percent of the economy, and when the consumer feels confident and powerful its just a question of time before things start ironing themselves out.”
MARKET REACTION: STOCKS: U.S. stock indexes rose sharply. BONDS: U.S. Treasury debt prices lost earlier gains. DOLLAR: U.S. dollar rose against the yen but fell against the euro.
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