Dow now at 10,543, up 18 points.
NEW YORK (AP) — The stock market’s rally was chilled Tuesday by
news that consumers are becoming more pessimistic.
Stocks fell modestly after three days of big gains. The Dow Jones
industrial average fell 3 points, and broader indexes dropped
slightly.
The Conference Board’s report that its Consumer Confidence Index
fell to 50.4 from June’s revised reading of 54.3 distracted
investors from another batch of upbeat earnings reports. The market
had expected the index to come in at 51.
Consumer confidence has been falling in recent months as people
have waited in vain for a turnaround in the job market. That has
made many consumers hesitant to spend and in turn raised concerns
about whether the economic recovery would continue.
Companies have a very different take on the economy from consumers.
Chemical maker DuPont Co. on Tuesday joined the growing number of
big corporations that have raised their forecasts for the future.
DuPont, a component of the Dow, also easily beat analysts’
predictions for its second-quarter profit and revenue.
Still, investors have been torn over the past few months between
buying on companies’ upbeat reports and selling on government and
private sector numbers that keep pointing to a slowing of the
economy.
“Investors are really uncertain whether to focus on the underlying
economy or earnings,” said Tyler Vernon, principal and portfolio
manager at Biltmore Capital Advisors.
Earnings had investors attention’ the past two weeks but the
occasional economic number can sometimes trump companies’ results,
Vernon said. When earnings reports are done, unsettling data on
jobs, housing and consumer spending will dominate trading, and may
well lead to more seling.
Traders initially shrugged off the consumer confidence report, then
began selling as the day wore on.
John Brady, a senior vice president at MF Global in Chicago, said
there is little that’s likely to turn around consumer confidence in
the near future. Consumers won’t become more optimistic until they
see a drop in unemployment and clear signs that employers are
hiring.
“I don’t know what turns around confidence aside from jobs growth,”
Brady said.
In midday trading, the Dow fell 3.52, or 0.03 percent, to
10,521.61.
The Dow has surged in July, rising 7.7 percent during the month.
The sharp gains helped push the index back into the black for the
year on Monday. In the past three trading days alone, the Dow has
jumped 405 points, or 4 percent, because of consistently strong
earnings and outlooks.
The Standard & Poor’s 500 index fell 3.63, or 0.3 percent, to
1,111.38, while the Nasdaq composite index fell 14.83, or 0.7
percent, to 2,281.60.
Losing stocks were ahead of gainers by 3 to 2 on the New York Stock
Exchange, where volume came to 604.6 million shares.
Bond prices fell, sending their yields higher. The yield on the
10-year Treasury note rose to 3.05 percent from 2.99 percent late
Monday. That yield helps set interest rates on mortgages and other
consumer loans.
Stocks got a lift Monday after a report on new home sales rose more
than expected last month. The housing market has remained weak,
particularly since a tax credit for home buyers expired at the end
of April.
The market had some other negative economic news Tuesday, a report
of a slowdown in regional manufacturing from the Richmond Federal
Reserve. The Richmond Fed’s manufacturing index fell to 16 this
month from 23 in June.
News on the housing market was mildly upbeat. The
S&P/Case-Shiller 20-city home price index for May rose 1.3
percent from April. But the homebuyer’s tax credit that expired
April 30 had an impact on the reading, and the report warned that
the recent gains in home prices are not likely to last.
But there was good economic news from overseas. Major European
banks including UBS AG and Deutsche Bank reported strong earnings.
The results came a few days after regulators evaluated banks across
Europe to see which might have trouble surviving another economic
downturn. Major European indexes rose following the earnings and
another positive report on Germany’s economy.
DuPont’s stock rose $1.21, or 3.1 percent, to $40.20.
UBS shares trading in the U.S. rose $1.27, or 8.4 percent, to
$16.42. Deutsche Bank jumped $1.59, or 2.4 percent, to $67.77.
Britain’s FTSE 100 rose 0.3 percent, Germany’s DAX index gained 0.2
percent, and France’s CAC-40 rose 0.8 percent. Japan’s Nikkei stock
average earlier fell 0.1 percent.
