Stocks fell sharply in midday trading Tuesday after a private research group said consumer confidence unexpectedly fell in June.
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 U.S. 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 Tuesday. 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. The 10-city index fell 18 percent from the year before.
While April marked the third straight month both indexes didn't set record price declines, a recovery in housing is still a long way off. The 20-city index is down almost 33 percent from its peak in the second quarter of 2006.
In midday trading, the Dow Jones industrials fell 104.37, or 1.2 percent, to 8,425.01. The S&P 500 index fell 11.30, or 1.2 percent, to 915.93, while the Nasdaq composite index fell 14.18, or 0.8 percent, to 1,829.88.
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 brought stocks up more than 30 percent off of 12-year lows reached in early March. The Dow has fallen 3.1 percent since hitting a five-month high on June 12. The S&P 500 index is down 2 percent over that same period.
"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.
Analysts say it may be difficult for the market to resume its advance in the near term, until investors get data that confirm things are actually getting better.
On Monday, a surge in oil prices drove energy, industrial and material stocks higher and helped push the Dow up nearly 91 points. The S&P 500 index added 8 points, while the Nasdaq rose 5.
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 Tuesday, however, after earlier hitting an eight-month high. Prices have been extremely volatile as of late as investors weigh the prospects for inflation against potential future demand.
Light, sweet crude fell $1.77 to $69.72 a barrel on the New York Mercantile Exchange.
There was also disappointing news from abroad Tuesday. 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 Tuesday, 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 were slightly lower Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.51 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 1.14, or 0.2 percent, to 509.47.
About two stocks fell for every one that rose on the New York Stock Exchange where volume came to a light 479.7 million shares, compared with 398.2 million shares at the same time the previous day.
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