U.S. consumers stay bullish on the economy

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China lower
Asia markets tumbled Tuesday even as the People’s Bank of China slashed its five-year loan prime rate by 25 basis points to 3.95%. The CSI 300 fell, while Hong Kong’s Hang Seng index also dropped. Futures for S&P 500, Nasdaq 100 and the Dow Jones Industrial Average were all down as the U.S. markets return to trade after a holiday. On the corporate earnings front, results from Home Depot and Walmart are due before the bell.

Capital One merger
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The latest University of Michigan survey for February showed consumer sentiment index rose 0.6 points to 79.6, having posted solid gains in the previous two months. 

“The fact that sentiment lost no ground this month suggests that consumers continue to feel more assured about the economy, confirming the considerable improvements in December and January across various aspects of the economy,” said Joanne Hsu, director of consumer surveys at the University of Michigan. 

“Consumers continued to express confidence that the slowdown in inflation and strength in labor markets would continue.”

The optimism comes amid a surprise pullback in retail sales last week, which showed consumer spending took a big hit in January.  

“The robust consumer confidence numbers provide some reassurance,” Pantheon Macroeconomics said in a note, adding that the “poor January retail sales report was a blip, rather than the start of a marked downturn in spending.” 

Still, the survey showed inflation expectations for the year ahead inched up to 3% from 2.9% in January, reflecting the conundrum the Fed faces in bringing inflation down to its 2% target.

It also comes on the back of hot CPI and PPI readings that delivered a one-two punch for markets last week.

The mixed economic picture reaffirms the notion that the last mile of the inflation fight will be the toughest.