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Stocks wobble on low volume after consumer confidence plunges; retailers fall the most
NEW YORK (AP) ' Stocks wavered between slight gains and losses Tuesday after consumer confidence dropped to the lowest level since April 2009. Trading volume was much lighter than usual because many investors are on vacation.
The drop in the Conference Board's Consumer Confidence Index was far worse than analysts expected, leaving the index at only half of the level consistent with a healthy economy. The index plunged 15 points to 44.5 in August, well below the estimate of 53.3 from economists surveyed by FactSet. The index is usually at 90 or above when the economy is strong.
The sharp fall in the measure of how U.S. consumers feel about the economy could mean weaker sales for retailers and makers of consumer goods like clothes and shoes. Retailers are in the midst of the critical back-to-school shopping season, which can account for as much as 25 percent of their annual revenue.
The Dow Jones industrial average was down 14 points, or 0.1 percent, to 11,524 at 1:45 p.m.
"Investors are swinging back to caution," said Randy Bateman, chief investment officer and president of Huntington Asset Advisors. "There's some reality that's setting in that we're not out of the woods yet on this economy."
Companies that rely most heavily on consumer spending fell more than the broader market. Retailers Kohl's Corp. and Lowe's Cos. each fell 2 percent. Nike Inc. fell 1.9 percent.
Boeing Co. rose 1.5 percent, the most of any company in the Dow, after the aircraft maker said it received approval from its board to build a version of its workhorse 737 jet with a redesigned engine. That should help it compete better with rival Airbus.
The Standard & Poor's 500 fell 4 points, or 0.3 percent, to 1,206. The Nasdaq composite index rose 2, or 0.1 percent, to 2,564.
Trading volume, or the number of shares bought and sold, was shaping up to be the lowest this year. About 2.1 billion shares exchanged hands on the New York Stock Exchange, the lowest since Dec. 31, 2010.
Low volume is worrisome because it suggests that few investors are driving the stock market's gains or losses. That creates the risk for bigger price swings, said Stephen Carl, principal and head of equity trading at The Williams Capital Group. A lack of volume also indicates that some investors don't believe that stocks are worth buying right now.
Stocks have swung widely in August. The Dow was down as much as 7.4 percent for the year on Aug. 10, but it is now down just 0.5 percent. On Monday, the Dow soared 254 points, its fourth-largest gain this year. Insurers rose the most after it became clear the damage from Tropical Storm Irene wasn't nearly as bad as analysts had feared.
The Standard & Poor's 500 index hit a 2011 low Aug. 8 after the U.S. government's credit rating was downgraded for the first time. Since then, it has risen 7.7 percent.
Bond prices have been just as volatile. The yield on the 10-year Treasury note briefly fell to a record low below 2 percent on Aug. 18 on weak manufacturing data from the Philadelphia Federal Reserve. On Tuesday, the yield fell to 2.18 percent, down from 2.27 percent late Monday.