Updated from 12:08 p.m. EDT
Tuesday's economic data gave more evidence of firming in the economy, with positive readings on consumer confidence and orders for durable goods. New-home sales fell, but stayed close to a record high.
Consumer confidence as measured by the Conference Board climbed to 81.3 in August, from a revised reading of 77 the prior month. Lower taxes and a slowdown in layoffs helped Americans muster more optimism about their prospects. Economists had expected a rise to 79.6, from an initially reported 76.6, the lowest level since March.
Despite the economy having lost 328,000 jobs so far this year, the report noted more consumers were hopeful they would find employment in the near future. The Labor Department is also expected to say the economy created 10,000 new jobs in August, breaking a six-month run of job losses.
David Rosenberg, chief North American economist at Merrill Lynch, noted that the gains in the confidence index came from future expectations, with the present-situation index falling to 61.6 from 63. He wrote in a report that "the answer lies in the labor market, which remains depressed."
Meanwhile, new orders for durable goods rose 1% in July to $174 billion. That was a slightly slower pace than June's 2.6%, but reflected strong demand for autos, computers and telecom equipment, the Commerce Department said. The report was in line with economists' estimates.
It was the first time since early 2001 that the index rose for two consecutive months. Excluding transportation equipment orders, it rose 1.7%, the largest jump since February. Durable-goods shipments rose 2.6% in July, while inventories fell 0.9%. The Treasury's 10-year note fell following the report but was recently up 4/32 to yield 4.51%.
"The continued plunge in durable-goods inventories indicates that output thus far is not keeping up with the robust increases in demand," said Jade Zelnik, chief economist at RBS Greenwich Capital. "While this could reflect lingering caution on the part of some business managers, in most cases, it is more likely that the drawdown is involuntary and will prompt an acceleration in production in the months ahead."
Elsewhere, new-home sales fell to an annualized 1.165 million in July after hitting a record 1.2 million the previous month. The figure was above economists' estimate of 1.150 million. Housing has remained strong despite higher interest rates as many home-buyers have rushed to lock in low mortgages in July, analysts say.
"The July number is statistically equivalent to the 1.2 million record, with housing demand still enormously strong," said Larry Horan, director of research at Parker/Hunter. "We're in a period in which there's a chronic shortage of single-family housing, with demand still poised to grow as immigration continues to boom in the U.S." He noted that among immigrants, the fastest-growing segment of the population, only 10% are homeowners, compared with the national rate of 70%.