Confidence Data Derail Stocks

A weak reading of consumer confidence cooled stocks on Tuesday, though the housing market offered some rays of hope.

The Dow Jones Industrial Average was up nearly 40 points immediately prior to the release of the confidence data at 10 a.m. Eastern, but the blue-chip measure quickly reversed course. It was recently down by 35 points, or 0.4%, at about 9753.92. Among its few bright spots was Boeing, which rose 3.6%.

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Since last week, investors have increasingly struggled with how to deal with the mixed signals that major economic releases are sending. While there are hints that the nearly two-year-long U.S. recession is winding down, there are also some nasty reminders that weak employment is continuing to weigh on many Americans' spending power.

"You can be tied into one data point too much; you have to keep in mind the big picture," said David Kotok, president of Cumberland Advisors, a portfolio-management firm in Vineland, N.J. "But we have built up a greater cash reserve for now," in part as a safeguard against further market turbulence.

The Conference Board said its monthly index of consumer confidence fell to 53.1 in September from 54.5 in August. Analysts had been hoping to see the measure rise to 57.

Other indexes were also lower following the report. The Nasdaq Composite Index was recently down 0.4%. The S&P 500 shed 0.2% after stronger early gains.

Despite Tuesday morning's market turnaround, stocks remain on pace to close out their strongest quarter in more than a decade. The Dow is up about 16% in the third quarter, which ends on Wednesday. That puts the average on pace for the best quarterly gain since 1998.

Home prices climbed in July from a month earlier, according to the S&P Case-Shiller home-price indexes, with just two of 20 metropolitan areas -- Las Vegas and Seattle -- showing declines. Every region posted year-over-year declines.

David M. Blitzer, chairman of S&P's index committee, said the rate of annual decline in home price values continues to decelerate, "and we now seem to be witnessing some sustained monthly increases across many of the markets."

The report helped lift the shares of home builders like D.R. Horton, which were up about 2%, and Lennar, up about 3%.

Among other stocks to watch, Walgreen shares were up more than 9% after the drugstore chain reported a 2% drop in fiscal fourth-quarter profit, but beat Wall Street expectations.

MBIA shares declined 5.6% after Standard & Poor's downgraded its main bond insurance unit to non-investment grade status. Shares of rival Ambac Financial Group were off 0.6%.

Front-month crude-oil futures fell 12 cents to $66.72 a barrel, while Comex gold futures were down slightly, sliding about $2.40 to $991.70 an ounce.

Overseas, Asian stocks followed Wall Street's Monday rise, with the Nikkei 225 climbing 0.9% in Tokyo. In Europe, stock indexes posted more modest gains.

The dollar strengthened against major rivals. One euro cost $1.4554, down from $1.4606 late Monday. One dollar fetched 90.17 Japanese yen, up from 89.63 yen.