A worse-than-expected consumer confidence report jarred Wall Street today, prompting investors to cash in profits from seven weeks of gains on fears of a tepid holiday season.
Analysts said stocks were already expected to pull back somewhat on lighter trading in advance of the Thanksgiving holiday, when the market is closed. The consumer sentiment news simply gave investors another reason to sell.
"People want to see a strong confidence number, especially with the holiday season coming up," said Stephen Carl, principal and head of equity trading at The Williams Capital Group. "If you don't see that, it doesn't bode well."
At 1 p.m., the Dow Jones industrial average was down 111.07, at 8,738.33, after gaining 44 points Monday.
The broader market was also lower. The Nasdaq composite index fell 16.72, to 1,465.18. The Standard & Poor's 500 index dropped 10.44, to 922.44.
The Conference Board said its Consumer Confidence Index rose to 84.1 this month from a nine-year low of 79.6 in October. The reading was the first increase in five months, but it fell below analysts' expectations of 85.0.
Analysts said the report failed to reassure investors as they sought to gauge how retailers might fare for the rest of the year. Consumer confidence drives consumer spending, which accounts for two-thirds of the nation's economic activity.
"It's important because it's in front of Black Friday," said Chris Wolfe, equity market strategist for J.P. Morgan Private Bank, referring to day after Thanksgiving, traditionally the busiest shopping day of the year.
Investors, meanwhile, shrugged off two encouraging economic reports.
The Commerce Department reported that the U.S. economy grew at a brisk 4 percent annual rate in the third quarter, faster than the original 3.1 percent rate estimated a month ago. The reading beat analysts' expectations.
And new home sales fell by 4.5 percent in October from the previous month to a seasonally adjusted annual rate of 1.01 million, the department said in another report. Even with the decline, October's sales pace marked the third best monthly level on record.
Analysts say investors have become increasingly upbeat about the strength of the economic recovery, pushing blue chip stocks higher for seven weeks even in the face of mixed news on retail sales and corporate profits.
But they caution that although the end of the year typically sees market rallies, Wall Street is vulnerable to some declines on profit-taking.
Semtech fell $2.75 to $15.36 after the semiconductor company warned that it expected fourth-quarter earnings to fall below analysts' expectations.
Tech Data dropped $2.97 to $30.30 after the distributor of microcomputer products said it will miss estimates due to a slowdown in tech spending.
Biogen declined $3.03 to $43.20 after Merrill Lynch lowered it's stock rating to sell from neutral.
Gainers included UnitedHealth, which rose $2.35 to $78.80, after the health insurer said it expects 2003 earnings to fall on the high end of expectations.
The Russell 2000 index, which tracks smaller company stocks, fell 4.79, or 1.2 percent, to 400.06.
Overseas, Japan's Nikkei stock average finished 1.4 percent lower. In Europe, France's CAC-40 fell 2.4 percent, Britain's FTSE 100 declined 1.2 percent and Germany's DAX index lost 2.4 percent.