Drop in confidence weighs on stocks

NEW YORK (AP) — A surprise drop in consumer confidence tripped up investors a day after a steep rally.

Stocks fell Tuesday 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.

“You had these M&A deals make people feel better about growth prospects and valuations,” said Nick Kalivas, vice president of financial research and senior equity index analyst at MF Global. “We don’t have any follow-through M&A today and the market really lacks a forward catalyst.”

With economic data still largely mixed, investors can’t seem to find enough reasons to extend the market’s nearly seven-month long advance, or at least keep it going at the same fervid pace. The benchmark Standard & Poor’s 500 index has gained 57.1 percent since hitting a 12-year low in March.

“Stock have been moving aggressively up,” said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors. “It’s natural for investors to want to lock in some of those gains as we end the quarter.”