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Confidence soaring — What you need to know in markets on Wednesday

Myles Udland
Markets Reporter

Consumer confidence in the U.S. is soaring.

On Tuesday, we learned that, according to The Conference Board, consumer confidence in the U.S. is at its highest level since 2000. In turn, U.S. stocks — which shook off an early-day sell-off on Monday — powered higher as the Dow broke an 8-day losing streak and each of the major indexes finished in the green.

Bond yields were also on the move on Tuesday, with the U.S. 10-year Treasury yield rising to 2.42%.

Wednesday will bring investors a bit of a calmer calendar, with pending home sales for February set to be the major economic data.

There will also be some Fedspeak on the schedule, with speeches due from Chicago Fed president Charles Evans, Boston Fed president Eric Rosengren, and San Francisco Fed president John Williams. Only Evans is an FOMC voter this year.

Politics and confidence

The political fallout from last week’s failed efforts by Republican leadership to jam through a replacement of Obamacare is certainly not over yet.

Markets, however, appear to have largely moved on.

And based on Tuesday’s consumer confidence release, many Americans might never have been all that concerned.

“Consumers’ assessment of current business and labor market conditions improved considerably [in March],” said Lynn Franco, director of economic indicators at The Conference Board. “Consumers also expressed much greater optimism regarding the short-term outlook for business, jobs and personal income prospects.

“Thus, consumers feel current economic conditions have improved over the recent period, and their renewed optimism suggests the possibility of some upside to the prospects for economic growth in the coming months.”

And while the latest survey was taken before Friday’s failure by House Republicans to even get a healthcare bill to the floor, most of March was filled with commentary — much of it bad — about the American Health Care Act. So while the first signature piece of legislation in the Trump era hadn’t yet failed, the writing was on the wall.

And consumers were undeterred.

So, too, were markets.

Last Friday we saw a few jitters in markets towards the end of the day and on Monday morning, things appeared to be heading in a “risk off” direction. Then we had the turnaround and on Tuesday markets went higher.

Which brings us back to the main themes of the economy and markets in the Trump era: confidence and divergence.

Consumers and business have been and clearly remain confident in their prospects under President Donald Trump.

Markets, for their part, also remain resilient amid a seeming never-ending onslaught of negative headlines out of Washington, D.C. The markets and politics narratives have been and continue to diverge from one another.

Now, we can argue about whether markets are higher because of confidence about Trump’s agenda or because of improving business and economic fundamentals. We can argue over whether consumer confidence is in reaction to better economic conditions or simply higher equity markets (and, in turn, larger retirement nest eggs).

But the core story of the economy under Trump — higher confidence, higher stocks, and potential legislative tailwinds — remains the same. For now.

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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