updated 8/4/2004 7:21:25 AM ET 2004-08-04T11:21:25

Stocks fell Tuesday, as the government reported a drop in U.S. consumer spending in June and crude oil prices surged again before pulling back slightly.

Major Market Indices

At the close of trading, the Dow Jones industrial average was down 60 points, or 0.6 percent, while the broader Standard & Poor’s 500-stock index was down 7 points, or 0.6 percent. The technology-rich Nasdaq composite index ended down 33 points, or 1.7 percent.

Stocks have been trading in a narrow range in recent weeks as investors worried about the impact of rising interest rates and energy prices, both of which could dampen the consumer activity which accounts for two-thirds of the U.S. economy. Concerns about the war in Iraq have also undercut investor confidence.

Still, investors on Monday shrugged off terror threats against America’s financial institutions and sent the Dow up for the fifth consecutive day — the first such stretch of gains since late November.

But more negative economic news Tuesday reversed that advance, and crude oil futures prices briefly topped $44 a barrel in the morning, suggesting that consumers — and businesses — could face even higher fuel costs in coming months.

“[Oil] is built into the price of everything,” said Barry Berman, head trader for Robert W. Baird & Co. in Milwaukee. As a result, it could raise the cost of products, which is inflationary, and cut into earnings, he said. “It’s that basic ... that far-reaching.”

Light crude for September delivery held under $44 a barrel in afternoon trading on the New York Mercantile Exchange, after rising as high as $44.24 earlier in the day. Monday’s closing level of $43.82 a barrel was the highest closing price since U.S. light crude futures began trading on Nymex in 1983. Video: Latest market news

Earlier, the Commerce Department reported that consumers in June slashed their spending by the largest amount in three years, reinforcing other recent indications the economic recovery slowed at the end of the second quarter.

The report said consumer spending dropped by a sharp 0.7 percent in June from the previous month. In May, consumers had ratcheted up spending a strong 1 percent. Americans’ incomes rose 0.2 percent in June, weaker than the 0.6 percent increase the month before. Both numbers were weaker than analysts had expected.

Richard E. Cripps, chief market strategist for Legg Mason in Baltimore, said the market’s modest decline bodes well.

“The market is indicating that the selling we had in July has pretty much run its course; it was a pretty vicious month,” he said. “If we can get oil prices down a buck or two, we’ll see a nice market gain.”

Shares in Martha Stewart Living Omnimedia Inc. was down 28 cents at $11.12 after the company — still struggling with the personal legal woes of its founder and former chairman — posted a wider loss than Wall Street expected in the second quarter. It also warned of bigger-than-expected losses in the third quarter. Martha Stewart Living posted a loss of $19.29 million, or 39 cents per share, in the three months ended June 30 in contrast to a profit of $931,000, or 2 cents per share, a year earlier.

Conglomerate Tyco International Ltd. was up 59 cents at $31.83 after the company said third-quarter profits surged 63 percent due to sharply lower production costs and double-digit revenue growth.

Moody’s Corp. was down 88 cents at $69.06 after Morgan Stanley downgraded the rating agency’s shares to “equal weight” from “overweight.”

Declining shares outnumber advancing issues by a narrow margin on the New York Stock Exchange, but by an almost 2-to-1 ratio on the Nasdaq stock market. NYSE volume came to 535.8 million shares compared with 497.2 million shares at the same time on Monday.

Overseas, Japan’s Nikkei stock average dropped 0.7 percent, Britain’s FTSE 100 rose 0.3 percent, and France’s CAC-40 rose 0.8 percent. Germany’s DAX index was up 0.4 percent.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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