U.S. consumer sentiment tumbled in early July as a stock market drubbing that took major indexes to multi-year lows roused Americans' fears for the future but failed to shake their assessment of the current situation.

The University of Michigan's preliminary consumer sentiment index fell to its lowest level since November 2001 in July, down to 86.5 from 92.4 in June, market sources said on Friday. 

That bucked economists' forecasts for a rise to 92.8. Analysts watch sentiment for clues on whether consumer spending, which supports about two-thirds of the economy, will maintain its strength. 

"The drop overall has negative implications for consumer spending as it is being paired with indications for sluggish employment and income growth," said Paul Ferley, assistant chief economist at Bank of Montreal/Harris Bank. 

The data triggered a sell-off in stocks and a rally in U.S. Treasury securities, which are pricing in an increased likelihood that the Federal Reserve will wait for months, perhaps until next year, before lifting interest rates from four-decade lows. 

Yet so far, consumer spending has remained strong and a weak sentiment index does not always translate into a sharp pullback in shopping. 

Indeed, the report followed news from the Commerce Department earlier on Friday that retail sales across the nation rose 1.1 percent last month, reversing a similar drop in May. 

"The entire deterioration this month was in expectations, which suggests to me that it is fear rather than consumers actually having experienced a deterioration in the economic environment or in their own personal financial situation," said Jade Zelnik, chief economist at Greenwich Capital Markets in Greenwich, Connecticut. 

The preliminary current conditions index, which tracks consumers' views about their present financial situation, fell only slightly, to 99.0 in early July from 99.5 in June. 

The expectations index, meanwhile, which measures attitudes about the 12 months ahead, plunged to 78.5 in early July from 87.9 in June. That was also the lowest level for this subcomponent since November. 

"The survey is telling us a story of the stock market decline contributing to the souring of consumer attitudes about the future, with survey respondents acknowledging that the economic reality on the ground is still decent," said Anthony Karydakis, senior financial economist at Banc One Capital Markets in Chicago. 

The preliminary University of Michigan consumer sentiment survey is based on telephone interviews with roughly 250 Americans across the country on personal finances and business and buying conditions. 

The survey was conducted through the middle of this week, capturing some of the steep declines in stock market indexes that brought the Standard & Poor's 500 down to a 4-1/2-year low. The survey is rounded out with 500 calls by month's end.