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US stocks slide on dip in consumer confidence

STOCKS fell sharply yesterday after a private research group said consumer confidence unexpectedly fell in June.

Even with the slide, stocks ended the second quarter with sharp gains. The Standard & Poor's 500 index is up 15 percent for the April-June period, its best quarter in a decade.

Investors had been expecting the Conference Board's measure of consumer sentiment to hold steady following big jumps in April and May. Consumer confidence is closely watched because spending from consumers accounts for more than two-thirds of US economic activity.

The latest data on the troubled housing sector provided no help to the market.

The number of homeowners at least two months behind or in foreclosure jumped in the first quarter from the previous quarter, a Treasury Department report said, and much of the increase came from borrowers who had good credit.

Meanwhile, the Standard & Poor's/Case-Shiller index showed home prices in 20 major cities dropped by 18.1 percent from April 2008. While April marked the third straight month the index didn't set record price declines, the index is down almost 33 percent from its peak in the second quarter of 2006.

After months of economic data showing that the recession was not getting worse, investors are hungry for signs that the economy is actually growing. Investors are nervous that the economy's rebound won't be as robust as hoped.

Those fears have stalled a three-month advance in the market that has brought the S&P 500 index up 36 percent from a 12-year low reached on March 9. Stocks are off their best levels on June 12.

"The market is concerned that this budding recovery is going to evaporate, was just a mirage," said Sung Won Sohn, an economics professor at California State University, Channel Islands.

The Dow Jones industrials fell 82.38, or 1 percent, to 8,447.00. The blue chips had been down by more than 100.

The S&P 500 index fell 7.91, or 0.9 percent, to 919.32, while the Nasdaq composite index fell 9.02, or 0.5 percent, to 1,835.04.

For the quarter, the Dow is up 11 percent, its first quarterly gain in more than a year and a half. It was the Dow's best quarter since the final three months of 2003.

The index is still down 40.4 percent from its high of 14,164.53 on Oct. 9, 2007. For June, the Dow slipped 0.6 percent, breaking a three-month streak of gains.

The S&P 500 index is up 15.2 percent, its strongest performance since the fourth quarter of 1998. The Nasdaq is up 20 percent.

With the second quarter ended, the big question weighing on the market is whether signs of an economic recovery will be evident by the end of the year. Analysts say it could be difficult for the market to resume its advance until investors get data that confirm things are actually getting better.

A big focus in coming weeks will be second-quarter earnings reports, and, more important, what companies have to say about prospects for business.

On Monday, a surge in oil prices drove energy, industrial and material stocks higher and helped push the Dow up nearly 91 points.

Randy Frederick, director of trading at Charles Schwab, said the recent spike in energy prices probably had a big impact on the consumer confidence report.

"Consumer confidence is incredibly sensitive to the price of gasoline at the pump," he said. "Prices have gone up the past few weeks and people are starting to feel that pinch again."

Oil prices tumbled yesterday, however, after earlier hitting an eight-month high. Prices have been volatile as of late as investors weigh the prospects for inflation against potential future demand.

Light, sweet crude dropped US$1.60 to settle at US$69.89 a barrel on the New York Mercantile Exchange.

There was also disappointing news from abroad yesterday. Japan's unemployment rate jumped to a five-and-a-half year high in May, the government reported. Meanwhile, Britain said its economy shrank in the first quarter by more than originally reported - the worst drop in half a century.

Britain's FTSE 100 closed down 1.0 percent. In other European trading, Germany's DAX index fell 1.6 percent and France's CAC-40 lost 1.7 percent. Earlier yesterday, Japan's Nikkei stock average added 1.8 percent.

Later this week, investors will get a key reading on the manufacturing sector as well as the much anticipated monthly unemployment tally. Markets are closed Friday in observance of the Independence Day holiday.

Bond prices fell yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.53 percent from 3.48 percent late Monday.

The dollar was higher against the euro and the British pound. Gold prices fell.

In other trading, the Russell 2000 index of smaller companies fell 2.33, or 0.5 percent, to 508.28.

About four stocks fell for every three that rose on the New York Stock Exchange where volume came to 1.3 billion shares, compared with 1.1 billion traded Monday.


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