News that consumers are more pessimistic put the stock market's rally on hold.
Stocks fell modestly Tuesday after three days of big gains. The Dow Jones industrial average rose 12 points for its fourth straight advance, but the gain was largely to due a jump in DuPont Co. after the chemical maker reported strong earnings. Broader market indexes fell slightly, and there were more losers than gainers on the New York Stock Exchange.
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 fallen 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 the economic recovery. Most retail stocks fell after the confidence number was released.
Companies have a very different take on the economy from consumers. Chemical maker DuPont on Tuesday joined the growing number of big corporations that have raised their earnings forecasts. DuPont also easily beat analysts' predictions for its second-quarter profit and revenue. The company's stock rose $1.39, or 3.6 percent, to $40.38, and accounted for 10.52 points of the Dow's advance.
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.
Although earnings had investors' attention the past two weeks, the occasional economic number like Tuesday's consumer confidence survey can 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 selling.
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.
The Dow rose 12.26, or 0.1 percent, to 10,537.69 after gaining 405 points the past three days on strong earnings and forecasts. The Dow has surged in July, rising almost 8 percent. The sharp gains helped push the index back into the black for the year on Monday.
The Standard & Poor's 500 index fell 1.17, or 0.1 percent, to 1,113.84, while the Nasdaq composite index fell 8.18, or 0.4 percent, to 2,288.25.
Losing stocks were ahead of gainers by about 4 to 3 on the New York Stock Exchange, where volume came to 1.1 billion 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.
The fact that stocks didn't fall further on the consumer news was a sign that investors weren't that upset by the reading. During the past few months, bad news after a big gain was likely to send stocks tumbling. But analysts said they saw more cashing in of gains rather than anxiety behind Tuesday's trading.
"People say they want to book their profits rather than wait for another plunge," said Richard A. Dickson, senior market strategist, at Lowry Research.
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.
UBS shares trading in the U.S. rose $1.35, or 8.9 percent, to $16.50. Deutsche Bank jumped $1.88 or 2.8 percent, to $68.06.
Apparel retailers were some of the hardest hit by the drop in consumer confidence. AnnTaylor Stores Corp. fell 33 cents, or 5 percent, to $16.87. Talbots Inc. fell 51 cents, or 4.3 percent, to $11.43.
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.