Drop in consumer confidence weighs on stocks
Tuesday, September 29, 2009
NEW YORK (AP) -- A suprise drop in consumer confidence sent stocks lower Tuesday, a day after the market shot higher on hopes that corporate dealmaking was making a comeback.
Major stock indicators edged mostly lower in afternoon trading, giving up earlier gains, after the Conference Board said its consumer confidence index fell to 53.1 in September. That was down from 54.5 in August and much lower than the reading of 57 that economists had been expecting.
The private research group attributed the decline to concerns about the labor market, saying consumers are still worried about losing their jobs. Consumer confidence has been a key focus for the stock market in recent months, and many analysts say a true turnaround in the economy can't occur until consumers start spending again and employers create more jobs.
The report tempered some of the market's early enthusiasm over a third straight monthly increase in home prices.
Tuesday's decline came after news of several big acquisitions helped stocks break a three-day losing streak on Monday, sending the Dow Jones industrials up more than 120 points.
With economic data still largely mixed, investors just can't seem to find enough reasons to extend the market's nearly seven-month long advance, or at least keep it going at the same fervid pace. The benchmark Standard & Poor's 500 index has gained 57.1 percent since hitting a 12-year low in March.
"Stock have been moving aggressively up," said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors. "It's natural for investors to want to lock in some of those gains as we end the quarter."
The Dow Jones industrials fell 28.19, or 0.3 percent, to 9,761.17. The Standard & Poor's 500 index fell 1.27, or 0.1 percent, to 1,061.71, and the Nasdaq composite index fell 5.01, or 0.2 percent, to 2,125.73.
Advancing stocks just narrowly outpaced decliners on the New York Stock Exchange, where volume came to 714.2 million shares, compared with 557 million shares traded at the same time on Monday.
In other trading, the Russell 2000 index of smaller companies slipped 0.24, or 0.04 percent, to 612.98.
Stocks jumped Monday as news of large takeovers by Xerox Corp. and Abbott Laboratories brought hope that corporate dealmaking could be making a comeback. That would be a big positive not only for the economy but also for the stock market as investors try to figure out which companies could become acquisition targets.
Analysts have been saying that some pullback in stocks is healthy considering how far and how fast the market has risen. But so far, any breaks in the advance have been fairly mild and brief, as investors who don't want to miss an opportunity to join in the market's climb higher keep the momentum going.
"There hasn't been any followthrough on those down days," said Howard Ward, portfolio manager at GAMCO Growth Fund, whose portfolio is concentrated in areas most sensitive to the economy, including technology, energy and financial stocks.
The market could sell off more if other economic reports fall short of expectations. Despite better signs on manufacturing and home sales, the labor market remains beaten down. Investors will get the latest news on employment on Friday when the Labor Department releases its monthly jobs report, one of the most closely watched economic reports on the calendar. Earnings reports from companies in the coming weeks could also move the market.
The Standard & Poor's/Case-Shiller home price index of 20 major cities provided the latest encouraging sign for the troubled housing sector Tuesday. The index rose 1.2 percent in July from June. Home prices are still 13.3 percent below July a year ago, but the annual declines have slowed in all 20 cities for the past six months.
Oil prices continued their decline Tuesday on the growing belief that the economy won't be strong enough to lift demand as much as expected. Oil had been steadily rising in recent months on expectations that the economy was going to be stronger, therefore pushing demand higher.
Crude fell 30 cents to $66.54 on the New York Mercantile Exchange.
Meanwhile, bond prices mostly fell after five days of gains. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.30 percent from 3.28 percent late Monday.
The dollar was mixed against other major currencies, while gold prices rose slightly.
Overseas, Japan's Nikkei stock average rose 0.9 percent. Britain's FTSE 100 fell 0.3 percent, Germany's DAX index lost 0.5 percent, and France's CAC-40 slipped 0.3 percent.
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