US stocks fall as consumer confidence weakens

US stocks closed slightly lower, ending a day in which major indexes wavered between small gains and losses.

New York: US stocks closed slightly lower, ending a day in which major indexes wavered between small gains and losses.

The Dow Jones industrial average dropped 44 points to close at 13,198 Tuesday, a loss of 0.3 percent.

Earnings from Lennar Corp. (LEN) helped pull housing stocks up. Lennar rose 4.7 percent, the best gain in the Standard & Poor's 500 index.

Major indexes opened higher, then pulled back after the Conference Board said its index of consumer confidence slipped in March. Around the same time, the Federal Reserve Bank of Richmond reported that a measure of regional manufacturing plunged this month.

Other indexes edged lower. The S&P 500 index dropped four points to 1,413. The Nasdaq composite fell two points to 3,120.

More than four stocks fell for every three that rose on the New York Stock Exchange. Trading volume was well below average at 3.4 billion.

Consumers' confidence in the US economy dropped in March amid higher gas prices, says a private research group. The decline comes after confidence rose to the highest level in a year during the previous month.

The Conference Board said Tuesday that its Consumer Confidence Index fell to 70.2, down from a upwardly revised 71.6 in February. Economists surveyed by FactSet expected a reading of 70.

Consumer confidence has recovered since it fell to a record 25.3 in February 2009. Still, the March number is below 90, a level which suggests a healthy economy. The index hasn't been near 90 since December 2007.

Economists watch consumer confidence closely because Americans' spending on things from clothing to health care accounts for about 70 percent of the nation's economic activity.

The price for a gallon (3.7 liters) of gas has risen 17 cents this month alone, well ahead of the traditional start of the driving season. That begins over the Memorial Day weekend.

Prices are also just 10 cents away from surpassing last year's peak, and energy experts believe they will keep going up.

High gasoline prices are taking their toll on consumers, which could threaten the young economic recovery.

Brian Gendreau, market strategist at Cetera Financial, said the stock market still has room to go higher even after such a strong start. Companies in the S&P 500 index are trading for around 13 times their expected earnings over the next year, below the average of 14.6 times over the past decade. And there's plenty of cash still tucked away in the Treasury market.

"Compared to bonds, stocks remain very attractive," Gendreau said. "That doesn't tell you if we'll get a move in a week or a month from now, but it does tell you that there's a lot of pent-up demand."

On Monday, Federal Reserve Chairman Ben Bernanke signaled that the US would continue with an accommodative economic policy because policymakers believe the employment outlook is still shaky despite several months of improvements.

In Europe, the FTSE 100 index of leading British shares was fell 0.5 percent at 5,869 while the CAC-40 in France dropped 0.9 percent to 3,469. Germany's DAX bucked the trend to trade flat at at 7,078.

In the currency markets, the euro gave up some recent gains, having earlier hit a near-month high against the dollar. It was trading 0.2 percent higher at USD 1.3332.

Bernanke's comments also helped support prices for commodities on Monday since they are traded in dollars — when the US currency drops, commodities become more attractive to investors holding other currencies, such as the euro.

Among stocks making big moves:

• Walgreen Co. (WAG) rose 1.2 percent. The drugstore chain posted a drop in quarterly earnings but the results still topped analysts' expectations.

•Apollo Group Inc. (APOL) fell 8 percent, the biggest drop in the S&P 500. The for-profit education company reported a profit in the most recent quarter but issued a dim forecast. Apollo expects fewer students to enroll in the coming quarter.

• Ista Pharmaceuticals Inc. (ISTA) leapt 7.8 percent on news that Bausch & Lomb plans to buy the drug maker for roughly USD 500 million in cash. Ista gets most of its revenue from Bromday, an eye drop for patients recovering from cataract surgery. Bausch & Lomb plans to pay USD 9.10 per share for Ista, a 72-cent premium over Monday's closing price. Bausch & Lomb is privately held.

Bureau Report