US consumer confidence rose unexpectedly in July and existing homes sales fell less than forecast in June, reports showed on Tuesday, boosting market expectations for an August rate hike by the Federal Reserve.
"Both numbers are stronger-than-expected - and confidence does matter, and it increases the odds of an increase by the Fed," said Robert Macintosh, chief economist at Eaton Vance Management in Boston. US interest rate futures moved toward a 60 percent chance of an August rate hike, up from about 50 percent prior to the release of the data.
The Federal Reserve has raised interest rates in 17 consecutive quarter point moves since June 2004, leaving its benchmark rate at 5.25 percent. Markets have been divided on whether the Fed would raise rates again at its August 8 meeting to quell remaining inflation pressures despite evidence of slowing growth.
Tuesday's data suggested the economy remained resilient, but there were other omens pointing to slackening economic growth and diminished corporate profitability going forward, which also weighed on stock prices.
Top executives at bellwethers 3M Co and United Parcel Service Inc said there were growing signs pointing to an uncertain outlook for the US economy through the latter part of the year. The Conference Board said its index of consumer sentiment climbed to 106.5 in July, up from 105.4 in June. Sentiment indexes have traditionally been seen as a gauge of US consumer spending, which accounts for roughly two-thirds of overall economic activity. Analysts had expected the index to fall to 104.0. The business research group's present situation index rose to 133.0 from 132.2 in June, while the expectations component improved to 88.8 from 87.5 in June.
Labour market conditions were little changed in July, according to the Conference Board. The National Association of Realtors said that sales of existing homes fell to a seasonally adjusted annual rate of 6.62 million units in June from an upwardly revised rate of 6.71 million units in May.
Analysts had expected home resales to slow even further to a 6.58 million unit rate from May's originally reported 6.67 million unit pace. There were a record 3.73 million homes for sale at the end of June, representing 6.8 months' supply, compared to 6.4 months at the end of May. Also released on Tuesday, the Federal Reserve Bank of Richmond's monthly manufacturing and service index for July rose to 12 from a reading of 4 in June. US chain store sales rose in the third week of July, boosted by some back-to-school buying, according to Redbook Research.
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