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Jump in consumer confidence pulls stocks from lows

INVESTORS set aside some of their worries about the economy yesterday after a closely watched measure of consumer confidence soared in April.

Stocks ended with only modest losses and well off their lows. Concerns about the viability of banks and the spread of swine flu were balanced by news from the Conference Board reported that its Consumer Confidence Index surged to its highest level since November.

IBM Corp.'s decision to boost its dividend and spend more to buy back stock also gave the market a shot of confidence.

The Dow Jones industrial average slipped 8.05, or 0.1 percent, to 8,016.95 after being down as much as 86 in the early going ahead of the consumer confidence report.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 2.35, or 0.3 percent, to 866.16, and the Nasdaq composite index fell 5.60, or 0.3 percent, to 1,673.81.

Todd Leone, managing director of equity trading at Cowen & Co., said investors have been growing more upbeat about prospects for the economy. That optimism followed a string of better-than-expected readings and has driven a market rally since early March.
"People aren't as afraid as they have been. We're definitely seeing more money come back into the market," he said.

That optimism took a hit ahead of the confidence reading as investors worried that a growth in swine flu cases could hurt industries such as travel and tourism. The World Health Organization raised its alert to Phase 4 out of 6, saying the flu spreads easily but is not a pandemic.

Banking troubles came back into the spotlight after news came out that regulators told Bank of America Corp. and Citigroup Inc. that they may need to raise more capital unless they can convince regulators that results of government "stress tests" were mistaken.

Bank of America fell 77 cents, or 8.6 percent, to US$8.15, while Citigroup fell 18 cents, or 5.9 percent, to US$2.89.

But the report on consumer confidence bolstered hopes that consumers not unemployed or struggling with debt might begin to step up their spending.

Some stocks that depend on consumer spending rose after the Conference Board said its index jumped 12 points to 39.2 this month. The reading was far better than the 29.5 that economists had expected, and suggests consumers might be willing to spend more if confidence continues to build.

Starbucks Corp. rose 30 cents, or 2.3 percent, to US$13.50, while Coca-Cola Co. advanced 4 cents to US$42.28.

"In the short term, this market is going to continue to trade on psychology," said Matt Eads, portfolio manager at Eads & Heald Investment Counsel in Atlanta. "People are looking for anything they can grab on to, which is a sign of good news and economic stabilization."

IBM rose US$1.99, or 2 percent, to US$101.94 after the company raised its quarterly dividend 5 cents to 55 cents. The company's board authorized another US$3 billion for repurchasing stock. The move brings the total available for buying up shares to US$6.7 billion.

"IBM's buyback and dividend hike has given the market some confidence and reminded people that there is a little bit of favorable news in technology," said Nick Kalivas, vice president of financial research at the brokerage MF Global in Chicago.

Unlike other major benchmarks, the tech-heavy Nasdaq composite index is up 6.1 percent this year as investors look for lean technology companies to benefit quickly from an economic recovery.

Investors responded more to news about individual stocks rather than buying entire industries, as had been the case in recent months when traders placed bets on consumer staples and technology companies expected to better endure the recession.

In other corporate news, Office Depot Inc. jumped 29 cents, or 11.5 percent, to US$2.82 after its first-quarter loss wasn't as bad as Wall Street feared.

Fortune Brands Inc., a maker of consumer products including Jim Beam bourbon and Titleist golf balls, rose US$1.42, or 3.9 percent, to US$37.94 after predicting its first-quarter earnings will beat analyst expectations.

In other trading yesterday, the Russell 2000 index of smaller companies rose 3.28, or 0.7 percent, to 472.81.

The swine flu gave investors reason to cash in recent gains Monday, but the Dow is still up 22.5 percent from the nearly 12-year low it reached in early March.

Bond prices fell, pushing the yield on the 10-year Treasury note up to 3.01 percent from 2.91 percent.

About four stocks rose for every three that fell on the New York Stock Exchange, where volume came to a light 1.25 billion shares.


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