Dwindling confidence weighs on stocks

The Nasdaq and the Dow slide as investors take in news that consumer confidence fell sharply and brace themselves for more economic data this week.

3 min read
News that consumer confidence was at its lowest level since 1994 pushed stocks lower Tuesday.

The Dow Jones industrial average fell 147.52 to 9,121.98. The Nasdaq composite index was down 32.11 to 1,667.41. CNET's technology indexes fell, led by the semiconductor index's 4.1 percent decline.

The markets' losses Tuesday followed steep declines Monday, when the Dow slid around 3 percent and the Nasdaq lost almost 4 percent. Analysts speculated that investors were getting nervous ahead of some key economic reports this week.

"The sell-off was in the cards," said C.E. Unterberg Towbin analyst John DeMaio. He noted that there was no major bad news Monday, "just general investor uncertainty about our economic future as well as profit-taking from a several week rally."

Investors got their first taste of the heavy course of economic news due this week, with a report on consumer confidence from the Conference Board, a private business research group.

The confidence index plunged to 85.5 in October, its lowest level since February 1994. It was also down sharply from its reading of 97 in September. The index gauges how cautious consumers are about spending--which makes up two-thirds of U.S. economic activity--and indicates what the economy is likely to do in coming months.

The results were worse than Wall Street's expectations for a drop to 95.6, and economists don't see an improvement in the near future.

"Widespread layoffs and rising unemployment do not signal a rebound in confidence any time soon," Lynn Franco, director of the Conference Board's Consumer Research Center, said in a statement.

Other reports due out this week include Wednesday's Commerce Department report on the gross domestic product, Thursday's National Association of Purchasing Management's October report on manufacturing and Friday's Labor Department report on October jobs data.

Among companies moving on quarterly reports, Openwave Systems slid $1.18, or 13 percent, to $ 7.81 after announcing Monday that net loss in its first quarter had shrunk from the same quarter last year. The company also warned that its second quarter would miss estimates and said it was restructuring and cutting jobs.

Solectron lost 95 cents to $12.05 after it warned of financial disappointments in fiscal 2002. The maker of electronics for other companies said it won't make previous estimates, which were for revenue of $16 billion to $18.5 billion and cash earnings of 62 cents to 66 cents per share. The company declined to say by how much it would miss forecasts.

Verizon Communications' third-quarter report Tuesday morning was also grim. The local telephone company said net income fell 46 percent from last year's third quarter, and it cut its growth outlook for the rest of the year. Shares dropped 89 cents to $49.30.

In merger news, CrossWorlds Software was up $1.01, or 29 percent, to $4.55 after news that IBM will buy the infrastructure software company. IBM shares rose 3 cents to $108.65.

Among other actively traded shares, Intel fell 64 cents to $23.54, Oracle rose 10 cents to $13.50, and Microsoft fell 76 cents to $58.88.

AOL Time Warner lost 58 cents to $31.57. Yahoo fell 21 cents to $11.09, and Amazon.com was off 63 cents to $6.42.

Staff and Reuters contributed to this report.