U.S. consumer sentiment improved slightly more than expected in July as the economy edged closer to a recovery and stock markets held their ground.

The University of Michigan's gauge of consumer confidence rose to 90.9 in July from June's 89.7, market sources said on Friday. This compared with a mid-month reading of 90.3, Wall Street forecasters had pegged the figure at 90.5, according to a Reuters poll.

"Financial markets were doing extremely well in ... July up until the very end and the tax cuts started to come through," said Steve Ricchiuto, chief U.S. economist at ABN Amro. "We've seen a lot of reversal so we'll probably not hold these levels."

The component outlining perceptions of current economic conditions was unchanged from June at 94.7, but the survey's outlook measure fell to 83.7 from 86.4 in June.

The Michigan findings ran counter to the Conference Board's (search) separate reading on confidence for July, released on Tuesday. That gauge fell unexpectedly on the month, in part due to persistent woes in the nation's labor market.

"The Conference Board index really tracks the jobless rate very closely. The Michigan index (search) tracks consumer willingness to spend," said Sung Won Sohn, executive vice president and chief economist at Wells Fargo Bank in Minneapolis, Minn. "Consumers are evidently willing to spend despite a jobless economic recovery."

In a mixed jobs report released earlier on Friday, the unemployment rate fell to 6.2 percent from 6.4 percent in July, while payrolls shrank 44,000 in the same period.