Exclusive: SEC forensics unit sought resources, cyber training ahead of 2016 hack

WASHINGTON (Reuters) – In August 2016, just two months before the U.S. Securities and Exchange Commission discovered its corporate filing system had been hacked, the SEC’s internal watchdog, Carl Hoecker, received a plea for help from his new forensics investigative unit.

In a three-page memo that was shared with U.S. Congressional staff and seen by Reuters, the head of the forensics unit complained of “serious deficiencies” in equipment, inadequate cyber defense training, and a lack of communication with the SEC’s Office of Information Technology (OIT).

The forensics unit’s staff were told to use equipment due for disposal when they asked for supplies and ended up repurposing computer hard drives instead. Their hardware budget for the fiscal 2017 year at $100,000 was about half a million dollars short of what was needed, the memo said.

“Even though the (Digital Forensics and Investigations Unit) has been in existence for over one year, there is no strategic vision and no clear objectives,” it read.

The concerns in the memo, however, were never addressed, according to sources familiar with the matter, and the Office of the Inspector General (OIG), run by Hoecker, was not notified of the October 2016 breach of the SEC’s corporate filing system known as EGDAR until many months later.

In August 2017, nearly a year after the hack, the inspector general’s office was asked to review the incident after SEC Chairman Jay Clayton learned about it, according to sources.

Clayton will face questions about the security breach when he testifies before the U.S. House Financial Services Committee on Wednesday.

He has asked the inspector general’s office to launch a review into the intrusion. What role, if any, that the digital forensics unit will play in that review remains unclear.

Raphael Kozolchyk, a spokesman for the Office of the Inspector General, did not respond to more than half a dozen requests from Reuters for comment. Hoecker did not respond to an email seeking comment.

Christopher Carofine, a spokesman for the SEC, declined to comment.

The SEC has been criticized for the length of time it took to disclose the hack and the delay in uncovering its extent. Its cyber defenses and practices have been questioned in the past, including by auditors inside Hoecker’s office.

Hoecker created the forensics unit in 2015. Besides assisting with computer forensics on internal criminal and civil probes, the office was also charged with helping to identify “threats to the SEC’s sensitive information systems” and to provide “cyber security capability,” he told Congress in two public reports in 2015 and 2016.

The 2016 memo, however, raises questions about the inspector general’s handling of its own forensics unit and whether it could have been in a better position to respond to and investigate the problem when it was first detected in October 2016.

“With the recent breach, the SEC and the SEC OIG need to make sure they didn’t overlook any warnings or calls for improvements that might have prevented a breach,” Republican Senator Charles Grassley of Iowa told Reuters in a statement.

“An agency that protects the integrity of public securities has to be up to speed on threats and how to prevent them.”


The SEC’s Inspector General’s Office is an independent internal watchdog that is tasked with policing waste, fraud and abuse and is staffed with investigators and auditors.

While the inspector generals at some of the larger government agencies are nominated by the President, the SEC’s inspector general is hired by and answers to the agency’s commissioners.

Under Hoecker, the SEC’s Inspector General’s Office has undergone a major restructuring.

Prior to his arrival in 2013, the office’s investigative staff did not have any criminal law enforcement powers and focused primarily on administrative probes involving SEC employees.

But Hoecker decided to take advantage of a provision in federal law that allows inspector generals’ offices to have law enforcement powers. He hired special agents who can carry firearms, conduct criminal investigations, make arrests and execute search warrants.

The Digital Forensics and Investigations Unit was part of Hoecker’s plan to have more enforcement muscle so that his office could conduct criminal investigations into hacking and provide forensic support on investigations.

As part of that vision, the forensics unit proposed conducting a full review of the SEC’s computer network, and wanted to develop a reporting system with the Office of Information Technology to help keep track of all cyber incidents, according to government documents shared with congressional staff.

Despite that proposal, the inspector general’s office has not received real-time notifications of cyber incidents, according to sources, a public 2017 audit of the SEC’s information security program, and internal government documents seen by Reuters.

“It is not uncommon to have a big push to do a cyber security initiative and then have the organization be uncomfortable with the nature and type of initiative people are starting,” said Beau Woods, a cyber security expert with the Atlantic Council.

“It sounds like there is either a communications gap, or a leadership gap, or both, where the right information is not getting to the right people.”

The inspector general’s investigators have done few, if any, probes related to cyber intrusions and most of their investigations, ranging from time and attendance fraud by SEC staffers to ethics violations, have not led to criminal charges despite the efforts to step up the office’s enforcement powers.

From January 2013 through April 2017, of the 71 cases referred for criminal prosecution to U.S. Attorneys offices, a total of 50, or about 71 percent, were declined, according to statistics obtained by Reuters through a Freedom of Information Act request.

Reporting by Sarah N. Lynch; editing by Carmel Crimmins

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Tesla shares fall on warning of Model 3 bottleneck

(Reuters) – Shares in Tesla Inc were down 2 percent in trading before the bell on Tuesday after the luxury electric vehicle maker said its planned ramp-up for the new Model 3 mass-market sedan faced production bottlenecks.

Tesla, which began production of the Model 3 in July, has so far delivered just 220 of those sedans and produced 260 during the quarter.

The production of 260 Model 3 sedans in the quarter was far below the 1,500 target and Tesla’s production goal of 5,000 a week by end of this year 2017 is at risk, Cowen and Co analysts wrote in a research note on Monday.

The brokerage affirmed its “underperform” rating on the stock.

Tesla is also set to face increased competition as rival General Motors Co on Monday outlined plans to add 20 new battery electric and fuel cell vehicles to its global lineup by 2023.

Shares of Tesla were trading at $334.97. GM shares were up 1.8 percent at $42.90 in premarket trading.

Reporting by Supantha Mukherjee in Bengaluru

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U.S. manufacturing activity hits 13-year high; construction spending up

WASHINGTON (Reuters) – U.S. factory activity surged to a more than 13-year high in September amid strong gains in new orders and raw material prices, pointing to underlying strength in the economy even as Hurricanes Harvey and Irma are expected to dent growth in the third quarter.

The economic outlook was also bolstered by other data on Monday showing a rebound in construction spending in August. The acceleration in manufacturing activity and the accompanying increase in prices could harden expectations that the Federal Reserve will raise interest rates in December.

The Institute for Supply Management (ISM) said its index of national factory activity surged to a reading of 60.8 last month, the highest reading since May 2004, from 58.8 in August.

A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy. The ISM said Harvey and Irma had caused supply chain and pricing issues in the chemical products sector. There were also concerns about the disruptive impact of the storms in the food, beverage and tobacco products industries.

The hurricanes are expected to chop off as much as six-tenths of a percentage point from gross domestic product growth in the third quarter. Harvey, which pummeled Texas at the end of August, has undercut consumer spending and weighed on industrial production, homebuilding and home sales.

Further weakness in likely after Irma struck Florida in early September, causing widespread power cuts. Manufacturing outside the areas affected by the hurricanes remained strong in September. The ISM survey’s production sub-index rose 1.2 points to a reading of 62.2 in September.

A gauge of new orders jumped to 64.6 in September from 60.3 in August. Factories reported paying more for raw materials, with the survey’s prices paid index surging 9.5 point to 71.5, the highest reading since May 2011.

The dollar rose against the euro after the data. Prices for U.S. Treasuries were trading higher as were stocks on Wall Street.

Single family homes being built by KB Homes are shown under construction in San Diego, California, U.S., April 17, 2017. REUTERS/Mike Blake


In separate report on Monday, the Commerce Department said construction spending rose 0.5 percent to $1.21 trillion. July’s construction outlays were revised sharply down to show a 1.2 percent plunge instead of the previously reported 0.6 percent drop. Construction spending increased 2.5 percent on a year-on-year basis.

The government said Harvey and Irma did not appear to have impacted the construction spending data as the responses from the Texas and Florida areas affected by the storms were “not significantly lower than normal.”

In August, spending on private residential projects increased 0.4 percent, rising for a fourth straight month. Spending on nonresidential structures increased 0.5 percent, snapping two straight monthly declines.

In the wake of Harvey and Irma, nonresidential construction spending could fall in September. According to the Commerce Department, Texas and Florida accounted for 22 percent of U.S. private nonresidential construction spending in 2016.

Investment in nonresidential structures such as oil and gas wells has been slowing as the boost from recovering oil prices fizzles. Private construction projects spending increased 0.4 percent in August.

Outlays on public construction projects rebounded 0.7 percent in August after slumping 3.3 percent in July. Spending on state and local government construction projects increased 1.1 percent in August. Gains in September are likely to be curbed by the hurricanes.

Texas and Florida accounted for 15 percent of U.S. state-and -locally owned construction spending in 2016, according to the Commerce Department.

Federal government construction spending tumbled 4.7 percent to its lowest level since April 2007.

Reporting By Lucia Mutikani; Editing by Andrea Ricci

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UK minister calls on Boeing to hold talks to end Bombardier dispute

MANCHESTER, England (Reuters) – Boeing (BA.N) needs to get around the table with Bombardier (BBDb.TO) and find a solution to its trade dispute that has put more than 4,200 jobs at risk in Northern Ireland, a senior British minister said on Sunday.

James Brokenshire, Britain’s minister for Northern Ireland, told his Conservative Party’s annual conference that Boeing’s role in getting the U.S. government to slap a 220 percent tariff on Bombardier’s CSeries jets, whose wings are made at a plant in Belfast, was unjust.

The U.S. planemaker accuses Canada and Britain of unfairly subsidizing Bombardier, a charge that Bombardier denies.

“The support that the UK provided to the Bombardier operation in Belfast was and remains compliant with international requirements,” Brokenshire said.

“I say to Boeing this case is unjustified and unwarranted. This action is not what is expected of a long-term partner to the UK. They need to get round the table and secure a negotiated outcome to this dispute quickly.”

Reporting by Kate Holton, editing by Elizabeth Piper

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When it comes to U.S. stocks, growth trumps quality

NEW YORK (Reuters) – U.S. investors are not rewarding companies for generating good earnings consistently, opting instead for a stockpicking strategy that might be called “growth at a high cost.”

High-quality stocks selected for their strong balance sheets and stable earnings have appreciated just 12 percent this year, according to Goldman Sachs Group Inc (GS.N), while the broader S&P 500 .SPX benchmark index has returned 13.8 percent.

But investors cannot seem to stop throwing money at companies improving their sales fastest: a group of such equities tracked by Goldman Sachs has surged 20 percent. Put another way, discriminating investors who have chosen companies with stable earnings prospects are being punished.

This lagging interest in quality stocks has even whipsawed well-known fund managers; Whitney Tilson said this week he was shutting down his Kase Capital Management LLC hedge fund.

“Historically, I have invested in high-quality, safe stocks at good prices as well as lower-quality ones at distressed prices,” Tilson wrote to investors.

“Given the high prices and complacency that currently prevail in the market, however, my favorite safe stocks (like Berkshire Hathaway (BRKa.N) and Mondelez (MDLZ.O)) don’t feel cheap, and my favorite cheap stocks (like Hertz (HTZ.N) and Spirit Airlines (SAVE.O)) don’t feel safe. Hence, my decision to shut down.”

Yet some managers are betting that complacent markets could be shaken from their zombie-like slumber as easy monetary policy and its backdrop of lower interest rates comes to an end.

“In an environment like we’re in now – where no one really cares what things are worth – you may underperform, but over time reality will set in,” said Sean O‘Hara, director at Pacer Financial Inc. “It always does.”


O‘Hara said quality investments underperform when investors are willing to buy stocks without regard to their value, and that markets have been supported by the U.S. Federal Reserve’s extraordinarily loose policies.

Earlier this month, the Fed, as expected, said it would begin to reverse some of those policies by gradually reducing its bond holdings.

Pacer Financial is one of a several investment firms betting that quality will matter again. Its “Cash Cows” ETFs buy companies with strong cash flows and healthy balance sheets.

Goldman Sachs’ global investment research unit included companies such as retailer Ross Stores Inc (ROST.O), pharmacist CVS Health Corp (CVS.N) and oil driller Schlumberger NV (SLB.N) in its high-quality group earlier this year.

Yet these companies have mostly not been star performers.

The market has been led by so-called “FANG” stocks – like Facebook Inc (FB.O), Amazon.com Inc (AMZN.O), Netflix Inc (NFLX.O) and Google parent Alphabet Inc (GOOGL.O) – and a small winner’s circle of lesser-known names like Celgene Corp (CELG.O) and Equinix Inc (EQIX.O).

These companies have all enjoyed robust sales growth in a U.S. economy that’s below its boiling point, even as many factors disqualify some of them as quality stocks. Netflix has had 12 straight quarters of negative free cash flow, and the company warned it may not see positive free cash flow “for many years” as it invests in original content like the science-fiction drama “Stranger Things.”

Still, its subscriber growth continues to exceed estimates, and the stock has rocketed more than 45 percent this year.


Investors are paying a premium for the luxury of revenue growth: $24 for every dollar of earnings per share anticipated over the next 12 months, compared to $20 for quality names and $13 for high adjusted free-cash-flow yield equities, according to Goldman Sachs data.

Raffaele Savi, a portfolio manager for BlackRock Inc’s (BLK.N) $647 million Global Long/Short Equity Fund (BDMAX.O), said strong revenue growth is “more rare than at many points in the past,” given U.S. gross domestic product growth averaging around 2 percent annually. The fund’s recent performance commentary said investors have been shunning company fundamentals.

With the Fed’s interest-rate hiking cycle taking hold, investors are bracing for market dynamics to change.

“When you see these huge headlines on big investors and hedge funds throwing in the towel because they can’t make sense of the market, that is a sign that things are about to turn,” said Guggenheim Partners LLC global chief investment officer Scott Minerd.

Part of the reason quality does not work as well as it once did may be that more assets follow “quantitative” funds that rely on the same statistics measuring quality, said Brian Hayes, equity strategist at Morgan Stanley & Co LLC (MS.N).

Plus, it’s harder for investors to assess what an earnings report is saying. Technology giants, for instance, derive more of their worth these days from services, patents and brand value, intangibles that can be hard to value.

Editing by Jennifer Ablan and Bernadette Baum

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Technology stocks drive S&P to record high

(Reuters) – Gains in technology stocks helped the S&P 500 eke out another record on the last trading day of the month, while the Dow was dragged down by losses in industrial stocks.

Nvidia (NVDA.O) was up 2.13 percent and was among the top boosts to the S&P after Citigroup raised its price target on the stock.

Market’s focus also remained firmly on President Donald Trump’s tax plan and his ability to push it through Congress.

Trump’s plan called for tax cuts for most Americans, but drew criticism that the plan favors business and the rich and could add trillions of dollars to the deficit.

“For the market the most important thing is tax cuts for the corporations and that, most likely, will not be tampered with,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

“But any disappointment going forward, would certainly take the wind out of this market as it has rallied on hopes of cuts.”

The dollar was on track for its biggest weekly rise in 2017 after Trump’s tax plan, while the three major Wall Street indexes were set to lock in gains for the month and the quarter.

At 9:39 a.m. ET (1339 GMT), the Dow Jones Industrial Average .DJI was down 39.44 points, or 0.18 percent, at 22,341.76, the S&P 500 .SPX was up 0.75 points, or 0.03 percent, at 2,510.81 and the Nasdaq Composite .IXIC was up 15.91 points, or 0.25 percent, at 6,469.36.

Data earlier in the day showed cooling consumer spending in August and slowing pace of annual inflation growth.

Seven of the 11 major S&P sectors were lower, led by a 0.51 percent loss in the energy index .SPNY. Oil giants Exxon (XOM.N) and Chevron (CVX.N) were the biggest drags on the S&P.

Technology index .SPLRCT rose 0.41 percent.

Alphabet’s (GOOGL.O) 1.12 percent rise and Amazon’s (AMZN.O) 0.6 percent gains propped up the Nasdaq.

KB Home (KBH.N) jumped about 6 percent after the homebuilder’s profit and revenue came above estimates, prompting a slew of price-target raises.

Advancing issues outnumbered decliners on the NYSE by 1,357 to 1,137. On the Nasdaq, 1,391 issues rose and 892 fell.

Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva

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U.S. second-quarter economic growth revised higher; jobless claims rise

WASHINGTON (Reuters) – The U.S. economy grew a bit faster than previously estimated in the second quarter, recording its quickest pace in more than two years, but the momentum probably slowed in the third quarter as Hurricanes Harvey and Irma temporarily curbed activity.

Gross domestic product increased at a 3.1 percent annual rate in the April-June period, the Commerce Department said in its third estimate on Thursday. The upward revision from the 3.0 percent rate of growth reported last month reflected a slightly faster pace of inventory investment.

Growth last quarter was the quickest since the first quarter of 2015 and followed a 1.2 percent pace in the January-March period. Economists had expected that the second-quarter GDP growth rate would be unrevised at 3.0 percent.

Harvey, which struck Texas, has been blamed for much of the decline in retail sales, industrial production, homebuilding and home sales in August. Further weakness is anticipated in September after Irma slammed into Florida early this month.

Rebuilding is, however, expected to boost GDP growth in the fourth quarter and in early 2018. Estimates for the growth rate in the July-September period are just above 2.2 percent.

However, they could be raised after another report from the Commerce Department on Thursday showed a decline in the goods trade deficit in August as well as large increases in both retail and wholesale inventories.

Harvey and Irma continue to impact the labor market and are expected to cut into job growth this month. In a third report, the Labor Department said initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 272,000 for the week ended Sept. 23.

Still, the labor market remains strong. Claims have now been below the 300,000 threshold, which is associated with a robust labor market, for 134 straight weeks. That is the longest such stretch since 1970, when the labor market was smaller.

Prices for U.S. Treasuries held losses after the data and the dollar .DXY fell to a session low against a basket of currencies. U.S. stock index futures were trading lower.


With GDP accelerating in the second quarter, the economy grew 2.1 percent in the first half of 2017. Still, economists believe growth this year will not breach President Donald Trump’s ambitious 3.0 percent target.

Trump on Wednesday proposed the biggest U.S. tax overhaul in three decades, including lowering the corporate income tax rate to 20 percent and implementing a new 25 percent tax rate for pass-through businesses such as partnerships to boost the economy.

But the plan gave few details on how the tax cuts would be paid for without increasing the budget deficit and national debt, setting up what is expected to be a bruising battle in the U.S. Congress.

Growth in consumer spending, which makes up more than two-thirds of the U.S. economy, was unrevised at a 3.3 percent rate in the second quarter as an increase in spending on services was offset by a downward revision to durable goods outlays. Consumer spending in the second quarter was the fastest in a year.

Amid robust consumer spending, businesses accumulated a bit more inventory than previously reported to meet the strong demand. Inventory investment added just over one-tenth of a percentage point to GDP growth in the second quarter. It was previously reported to have been neutral.

Growth in business spending on equipment was unchanged at a rate of 8.8 percent, the fastest pace in nearly two years.

Investment on nonresidential structures was revised to show it increasing at a 7.0 percent pace, up from the previously reported 6.2 percent rate.

Both export and import growth were revised slightly lower. Trade contributed two-tenths of a percentage point to GDP growth last quarter. Housing was a slightly bigger drag on growth in the last quarter than previously reported, subtracting 0.3 percentage point from output.

The government also sharply revised down growth in corporate profits for the second quarter. Profits after tax with inventory valuation and capital consumption adjustments increased at a 0.1 percent rate instead of the previously reported 0.8 percent pace.

Reporting by Lucia Mutikani; Editing by Paul Simao

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Britain warns Boeing it might lose business over Bombardier row

BELFAST/LONDON (Reuters) – Britain told U.S. planemaker Boeing on Wednesday that it could lose out on British defense contracts because of its dispute with Canadian rival Bombardier which has put 4,200 jobs at risk in Northern Ireland.

The U.S. Department of Commerce on Tuesday imposed a 220-percent duty on Bombardier’s (BBDb.TO) CSeries jets, whose wings are made at a plant in Belfast, following a complaint by Boeing (BA.N) which accuses Canada of unfairly subsidizing Bombardier.

The ruling is a political headache for Britain’s minority Conservative government, which relies on support from a Northern Irish party to stay in power.

It also undermines the government’s assurances to Britons that free trade and London’s close ties with Washington will be pillars of Britain’s prosperity and global influence after it leaves the European Union in 2019.

“This is not the behavior we expect from Boeing and it could indeed jeopardize our future relationship with them,” British Defence Secretary Michael Fallon told reporters in Belfast.

“Boeing has significant defense contracts with us and still expects to win further contracts. Boeing wants and we want a long-term partnership but that has to be two-way.”

Bombardier is the largest manufacturing employer in Northern Ireland, which is the poorest of the United Kingdom’s four parts and is mired in political difficulties after emerging from decades of armed sectarian conflict.

“Bitterly disappointed by initial Bombardier ruling,” said British Prime Minister Theresa May, who had personally asked U.S. President Donald Trump to help resolve the dispute.

“The government will continue to work with the company to protect vital jobs for Northern Ireland,” she said on Twitter.

Boeing said in a statement it was committed to the UK, but gave no indication that it might change tack in the dispute.

“We have heard and understand the concerns from the Prime Minister and the Government about Bombardier workers in Northern Ireland,” the statement said.

Boeing said that since 2011 it had tripled its spending in the United Kingdom to 2.1 billion pounds ($2.8 billion) in 2016, while the firm and its suppliers accounted for more than 18,700 UK jobs.


The row has come at a bad time for May, who was severely weakened by her party’s poor showing in an election in June and who has been struggling to contain infighting within her top team over Brexit.

Manufacturing Northern Ireland, an industry group, said the row was an ominous sign of the difficulties Britain could face after leaving the EU.

“What we could be witnessing is the fundamental difference between being a fully-fledged member of an internal market and a junior partner in a free trade agreement,” it said.

“This does not bode well for the UK’s plan to be a leader in global free trade nor indeed ambitions of a free trade agreement with the EU which cannot match the benefit we currently enjoy as part of the EU’s Single Market.”

At the Bombardier plant in Belfast, workers were nervous about what impact the dispute could have on their livelihoods.

“Nobody knows how it will end up,” said aircraft fitter George Burnside, 56, who has worked for Bombardier for 27 years. “I am concerned. I was shocked at the size of the tariff.”

The U.S. penalty will only take effect if the U.S. International Trade Commission (ITC) rules in Boeing’s favor. A final decision is expected early in 2018.

British Business Secretary Greg Clark said he was confident the initial Department of Commerce ruling would be overturned, arguing that Bombardier’s CSeries jets did not compete with Boeing.

But Boeing conceded no ground, accusing Bombardier of illegally dumping its products in the U.S. single-aisle airplane market out of desperation.

“Any claimed economic threat to Bombardier is due to the weakness of its product in the marketplace,” said Boeing.


Arlene Foster, leader of the DUP, the Northern Irish party that is propping up May’s minority government, signaled she would put pressure on May to act.

“Everyone realizes how important Bombardier is to Northern Ireland and we will use our influence with our government to make sure that continues,” she told Sky News.

However, London’s options in fighting Bombardier’s corner may be limited because of the importance of Boeing to its defense industry.

Boeing says the United Kingdom is its third largest supply base after the United States and Japan. It has recently begun constructing its first European parts manufacturing site in Sheffield, northern England.

Britain recently ordered the Boeing P-8 maritime surveillance plane and a new fleet of Apache attack helicopters made by the U.S. giant. Its armed forces have deployed Chinook helicopters, the C-17 transport plane and the E-3 Sentry airborne early warning and command post.

British defense analyst Howard Wheeldon said it was unlikely that Britain would pursue any reprisals against Boeing.

“I think there is a lot of saber-rattling, but in practical terms it is not on,” he said when asked whether Britain could cancel or reduce Boeing defense orders.

“They can play politics, but can’t actually walk away from what they need and have committed to buying from Boeing.”

Additional reporting by Tim Hepher and Conor Humphries in Belfast, Padraic Halpin in Dublin, Guy Faulconbridge, Kate Holton and Michael Holden in London; Writing by Estelle Shirbon; Editing by Angus MacSwan and Robin Pomeroy

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U.S. consumer confidence falls; new home sales hit eight-month low

WASHINGTON (Reuters) – U.S consumer confidence fell in September and home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma, supporting the view that the storms would hurt economic growth in the third quarter.

The economy, however, remains on solid ground as other data on Tuesday showed a strong increase in house prices in July.

The Conference Board said its consumer confidence index declined to a reading of 119.8 this month from 120.4 in August, which was the highest reading in five months. It said confidence in Texas and Florida “decreased considerably.”

The survey showed consumers’ views of the labor market were less upbeat. The share of consumers saying jobs are “plentiful” fell to 32.6 percent from 34.4 percent in August.

However, the proportion of those stating jobs are “hard to get” slipped to 18.1 percent from 18.4 percent. The number of consumers expecting an improvement in their incomes rose marginally to 20.5 percent this month from 19.9 percent in August. The share expecting a drop in income was unchanged at 8.3 percent.

Despite being near full employment, the labor market has struggled to generate strong wage growth, frustrating both consumers and policymakers. But rising home prices should continue to underpin consumer spending, even though the housing market is slowing.

A second report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of house prices in 20 metropolitan areas rose 5.8 percent in July on a year-over-year basis after increasing 5.6 percent in June.

An acute shortage of homes on the market and strong demand are pushing up house prices. While rising house prices are boosting equity for homeowners, tight inventories are hurting home sales.

The U.S. dollar .DXY rose to its highest level since Aug. 31 against a basket of currencies after the data. U.S. stocks were trading higher while prices of U.S. Treasuries fell.

HOUSING SLOWING In a third report, the Commerce Department said new home sales decreased 3.4 percent to a seasonally adjusted annual rate of 560,000 units last month, which was the lowest level since December 2016.

Economists polled by Reuters had forecast new home sales, which account for 9.5 percent of overall home sales, rising 3.3 percent to a pace of 588,000 units last month.

New home sales, which are drawn from permits, are volatile on a month-to-month basis. Sales were down 1.2 percent on a year-on-year basis in August. The Commerce Department suggested Harvey and Irma likely impacted new home sales data last month.

It said “information on the sales status at the end of August was collected for only 65 percent of cases in Texas and Florida counties” affected by the hurricanes. That compared to a normal response rate of 95 percent.

Harvey hurt sales of previously owned homes in August and held back the completion of houses under construction. With Irma slamming Florida in September, housing market activity could remain weak. The areas in Texas and Florida affected by the storms accounted for 14 percent of single-family home permits in 2016.

Even before the hurricanes struck, the housing market was softening. Housing is being buffeted by headwinds, including shortages of homes available for sale, skilled labor and suitable land for building. Rising prices for building materials are also undercutting housing.

Housing weighed on the economy in the second quarter and economists expect the sector to be a drag on gross domestic product in the July-September period.

In August, new single-family homes sales fell in the Northeast, South and West. They were unchanged in the Midwest.

The inventory of new homes on the market rose 3.6 percent to 284,000 units, the highest level since May 2009. Still, new housing stock is less than half of what it was at its zenith during the housing bubble.

At August’s sales pace it would take 6.1 months to clear the supply of houses on the market, up from 5.7 months in July. A six-month supply is viewed as a healthy balance between supply and demand.

Reporting by Lucia Mutikani; Editing by Paul Simao

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Wall St. lower as technology stocks drag

(Reuters) – A selloff in technology stocks, led by Facebook and Apple, drove down major Wall Street indexes on Monday.

Apple (AAPL.O) fell more than 1 percent, extending its losses from last week due to a lukewarm response to its iPhone 8 globally.

Facebook’s (FB.O) 3.2 percent was the biggest drag on the S&P 500 and the Nasdaq.

Heightened expectations of another interest rate hike this year following comments from a Federal Reserve official also added to the downbeat sentiment.

The central bank is on track to gradually raise interest rates as factors depressing inflation are fading and the U.S. economy’s fundamentals are sound, New York Federal Reserve President William Dudley said.

Investors are also awaiting a speech by Fed Chief Janet Yellen later in the week for more guidance on the monetary policy.

“Investors would like to get more clarity as far as what the Fed is going to do as they move forward with the unwinding of the balance sheet and how they are going to move forward next year,” said Robert Pavlik, chief market strategist at Boston Private Wealth in New York.

The U.S. central bank left interest rates unchanged in its September policy meeting, as expected, but signaled it still expects one more increase by the end of the year, despite a recent bout of low inflation..

At 9:39 a.m. ET, the Dow Jones Industrial Average .DJI was down 8.21 points, or 0.04 percent, at 22,341.38, the S&P 500 .SPX was down 3.1 points, or 0.12 percent, at 2,499.12 and the Nasdaq Composite .IXIC was down 36.20 points, or 0.56 percent, at 6,390.72.

Five of the 11 major S&P sectors were lower.

General Motors (GM.N) rose 2.46 percent after Deutsche Bank upgraded the automaker’s stock to “buy”, pointing to its autonomous vehicles, which could be ready for deployment within quarters.

Allergan (AGN.N) was up more than 2.6 percent after the drugmaker authorized a $2 billion buyback of its shares and said its chief financial officer would retire.

Chicago Chief Charles Evans and his Minneapolis counterpart, Neel Kashkari are scheduled to speak later in the day.

Advancing issues outnumbered decliners on the NYSE by 1,391 to 1,085. On the Nasdaq, 1,279 issues fell and 1,061 advanced.

Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva

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