NEW YORK – Interest rate worries sent share prices lower Tuesday on Wall Street after strong consumer confidence and home sales data signaled that the economy is holding up better than expected and suggested that the Federal Reserve has room for more rate increases.
The Dow Jones industrial average dropped 53.07, or 0.5 percent, to 11,283.25.
Crude oil prices fell following an announcement by President Bush that he would waive regional clean-air specifications for summer-grade gasoline to attract more imports of fuel to the United States. Bush also said he would halt deposits of oil to the nation's strategic petroleum reserve until fall, but analysts said the measure would have little impact on crude prices and certainly not help make gasoline any cheaper.
Light sweet crude for June delivery settled 45 cents lower at $72.88 a barrel on the New York Mercantile Exchange, dropping on the heels of a 4.48-cents-per-gallon decline in May gasoline futures, which finished at $2.1291 a gallon.
Broader stock indicators also fell. The Standard & Poor's 500 index slipped 6.37, or 0.5 percent, to 1,301.74, while the Nasdaq composite index fell 3.08, or 0.1 percent, to 2,330.30.
Bond prices drifted lower, with the yield on the 10-year Treasury note edging up to 5.071 from 4.98 percent late Monday. The dollar was stable against other major currencies, while gold rose.
The Conference Board said consumers shrugged off higher gasoline prices in April and sent its widely watched barometer of consumer confidence to its highest level in almost four years. The private research group said its consumer confidence index rose to 109.6 from a revised 107.5 in March. April's reading was the highest since the index touched 110.3 in May 2002. Analysts had expected a reading of 106.4.
Still, the survey was taken before the worst of the month's gas price increases hit the pumps, which raised the possibility of a drop in confidence when the May survey is taken.
The National Association of Realtors, meanwhile, said sales of previously owned homes edged up slightly in March.
The strength in both numbers suggested the Fed may be in a position to raise rates beyond the quarter percentage point increase widely expected at its next meeting in May.
"We're in a funny space," said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons in St. Louis. "Too much good news is not good news because the market worries about the Fed."
Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago, said that while the market earlier thought the May increase would be the last, "I think a June tightening is on the table."
Higher rates would cool consumer spending — and the overall economy — "and that obviously will put a damper on the market as well," Ablin said.
Reynolds American Inc., maker of Camel and Kool cigarettes, rose 84 cents, or 0.8 percent, to $110.67 after announcing that it agreed to buy privately held Conwood for $3.5 billion, expanding its reach into the chewing tobacco market.
Sun Microsystems Inc. added a penny to $4.99 after the networking firm said late Monday Scott McNealy is stepping down after more than two decades as chief executive. Critics say McNealy has been slow to cut costs and make other changes.
International Business Machines Corp. increased its dividend by 50 percent Tuesday to 30 cents in an attempt to jolt the technology bellwether's listless stock price. Its share rose 56 cents, or 0.7 percent, to $82.67.
In earnings news, Dow component DuPont Co. said rising energy and materials costs led to a 16 percent slide in quarterly profit, but the chemical maker nonetheless boosted its 2006 outlook. DuPont dropped 58 cents, or 1.3 percent, to $43.96.
AT&T Inc.'s quarterly profit swelled 63 percent in its first report following SBC Communications's acquisition of AT&T. Revenue jumped 55 percent to reach $15.8 billion. AT&T gained 7 cents, or 0.3 percent, to $25.60.
The Russell 2000 index of smaller companies slipped 1.32, or 0.2 percent, to 764.82.
Declining issues outpaced advancers by nearly 2 to 1 on the New York Stock Exchange, where preliminary consolidated volume was volume of 2.42 billion shares exceeded Monday's total of 2.26 billion.
Overseas, Japan's Nikkei stock average added 0.33 percent. Britain's FTSE 100 slipped 0.2 percent, Germany's DAX index was unchanged and France's CAC-40 rose 0.3 percent.