Consumer confidence rose modestly in August and home prices gained more than expected in June, easing some worries the economy is headed for another downturn soon.
Another report released on Tuesday showed the pace of growth in business activity in the U.S. Midwest slowed in August, but economists said the data overall did not present new worries about the path of the economy.
The data shows the economy, while it is not going on all cylinders, is also not sliding into this double-dip recession that people are concerned about, said Eric Kuby, chief investment officer at North Star Investment Management Corp in Chicago.
Financial markets, however, were reluctant to read too much into the numbers, particularly as investors awaited the release on Friday of the government's closely watched monthly report on the U.S. labor market.
Tuesday's mostly upbeat data follows a slew of disappointing economic reports in recent weeks.
The Conference Board, an industry group, said on Tuesday its index of U.S. consumer attitudes, seen as a gauge of consumer spending, rose to 53.5 in August from an upwardly revised 51.0 in July.
The median of forecasts from analysts polled by Reuters was for a reading of 50.5. Forecasts ranged from 47.5 to 55.0.
Consumer spending typically accounts for about two-thirds of U.S. economic activity and is considered critical to the recovery.
Much of the impact of the day's data on the markets was largely gone by day's end. The Standard & Poor's 500 index <.SPX> ended nearly flat after rising earlier on the reports.
U.S. Treasury debt prices gained as minutes from the last Federal Reserve policy meeting said policymakers saw increasing risks to economic growth, while the dollar fell against the yen.
Also supporting the view that the economy is not headed for another major downturn, U.S. bank regulator Sheila Bair said in a quarterly briefing that while the recovery is sluggish, she does not anticipate a double-dip recession in the United States.
Friday's jobs report is forecast by economists in a Reuters poll to show U.S. nonfarm payrolls fell for a third straight month in August, thanks to a fading boost from census hiring, a reluctance by firms to add staff and continued government layoffs.
Payrolls are seen falling 100,000 in August, while the unemployment rate is seen rising to 9.6 percent, from 9.5 percent in July.
HOME PRICES UP, BUT RECOVERY SLOWS
In another encouraging sign for the economy, prices of U.S. single-family homes gained more than expected in June and rose in the second quarter. The S&P/Case Shiller composite index of 20 metropolitan areas rose 0.3 percent in June from May on a seasonally adjusted basis.
The rise was better than the 0.2 percent increase expected by economists polled by Reuters, though slower than May's 0.5 percent rise.
The gain, however, likely reflected the lingering boost from homebuyer tax credits that ended in April, and economists agree the effects of buyer tax credits have largely filtered through. They say home prices will be hard pressed to sustain these gains with unemployment still near 10 percent.
Still, the data suggested a positive trend.
We've seen in most of the government data as well that pricing is stabilizing or slightly improving, said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York.
Also on Tuesday, the Institute for Supply Management-Chicago said its business barometer dropped to 56.7 in August. The reading was 62.3 in July, and economists had forecast an August reading of 57.
The employment component of the index fell to 55.5 from 56.6 in July. New orders fell to 55.0, from 64.6. A reading above 50 indicates expansion in the regional economy.
Separately, the Federal Deposit Insurance Corp. said problem loans fell in the second quarter for the first time in four years.
(Additional reporting by Lynn Adler, Ann Saphir, Edward Krudy, John Parry and Wanfeng Zhou; editing by Todd Eastham)