- The Washington Times - Wednesday, September 30, 2009

NEW YORK | A surprise drop in consumer confidence tripped up investors Tuesday, a day after two corporate takeovers set off a steep market rally.

Stocks fell after the Conference Board said its Consumer Confidence Index fell to 53.1 in September. That was down from 54.5 in August and much lower than the reading of 57 that economists had been expecting.

The private research group attributed the drop to concerns about the labor market, saying consumers are still worried about losing their jobs. Consumer confidence has been a focus for the stock market in recent months, and many analysts warn a turnaround in the economy won’t hold if consumers don’t start picking up spending and employers add jobs.

The report offset early enthusiasm over a third straight monthly increase in home prices.

Stocks broke a three-day losing streak Monday after news of several big acquisitions signaled to investors that corporate America is feeling more confident about the economy and willing to take on more risk. The disappointing decline in consumer confidence Tuesday was a stark reminder that American consumers aren’t as upbeat, meaning they’re likely to keep their spending in check.

The Dow Jones Industrial Average fell 47.16, or 0.5 percent, to 9,742.20, chipping away part of Monday’s 124-point gain. The S&P; 500 Index slipped 2.37, or 0.2 percent, to 1,060.61, and the Nasdaq Composite Index fell 6.70, or 0.3 percent, to 2,124.04.

In other trading, the Russell 2000 Index of smaller companies fell 2.77, or 0.5 percent, to 610.45.

Stocks jumped Monday as news of large takeovers by Xerox Corp. and Abbott Laboratories brought hope that corporate dealmaking could be making a comeback.

That would be a big positive not only for the economy but also for the stock market as investors try to figure out which companies could become acquisition targets. But the disappointing consumer confidence report was a stark reminder that the consumer isn’t as upbeat about the recovery.

Meanwhile, bond prices mostly fell after five days of gains. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.30 percent from 3.28 percent late Monday.

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