NEW YORK – The stock market's rally was chilled Tuesday by news that consumers are becoming more pessimistic.
Stocks fell modestly after three days of big gains. The Dow Jones industrial average fell 3 points, and broader indexes dropped slightly.
The Conference Board's report that its Consumer Confidence Index fell to 50.4 from June's revised reading of 54.3 distracted investors from another batch of upbeat earnings reports. The market had expected the index to come in at 51.
Consumer confidence has been falling in recent months as people have waited in vain for a turnaround in the job market. That has made many consumers hesitant to spend and in turn raised concerns about whether the economic recovery would continue.
Companies have a very different take on the economy from consumers. Chemical maker DuPont Co. on Tuesday joined the growing number of big corporations that have raised their forecasts for the future. DuPont, a component of the Dow, also easily beat analysts' predictions for its second-quarter profit and revenue.
Still, investors have been torn over the past few months between buying on companies' upbeat reports and selling on government and private sector numbers that keep pointing to a slowing of the economy.
"Investors are really uncertain whether to focus on the underlying economy or earnings," said Tyler Vernon, principal and portfolio manager at Biltmore Capital Advisors.
Earnings had investors attention' the past two weeks but the occasional economic number can sometimes trump companies' results, Vernon said. When earnings reports are done, unsettling data on jobs, housing and consumer spending will dominate trading, and may well lead to more seling.
Traders initially shrugged off the consumer confidence report, then began selling as the day wore on.
John Brady, a senior vice president at MF Global in Chicago, said there is little that's likely to turn around consumer confidence in the near future. Consumers won't become more optimistic until they see a drop in unemployment and clear signs that employers are hiring.
"I don't know what turns around confidence aside from jobs growth," Brady said.
In midday trading, the Dow fell 3.52, or 0.03 percent, to 10,521.61.
The Dow has surged in July, rising 7.7 percent during the month. The sharp gains helped push the index back into the black for the year on Monday. In the past three trading days alone, the Dow has jumped 405 points, or 4 percent, because of consistently strong earnings and outlooks.
The Standard & Poor's 500 index fell 3.63, or 0.3 percent, to 1,111.38, while the Nasdaq composite index fell 14.83, or 0.7 percent, to 2,281.60.
Losing stocks were ahead of gainers by 3 to 2 on the New York Stock Exchange, where volume came to 604.6 million shares.
Bond prices fell, sending their yields higher. The yield on the 10-year Treasury note rose to 3.05 percent from 2.99 percent late Monday. That yield helps set interest rates on mortgages and other consumer loans.
Stocks got a lift Monday after a report on new home sales rose more than expected last month. The housing market has remained weak, particularly since a tax credit for home buyers expired at the end of April.
The market had some other negative economic news Tuesday, a report of a slowdown in regional manufacturing from the Richmond Federal Reserve. The Richmond Fed's manufacturing index fell to 16 this month from 23 in June.
News on the housing market was mildly upbeat. The S&P/Case-Shiller 20-city home price index for May rose 1.3 percent from April. But the homebuyer's tax credit that expired April 30 had an impact on the reading, and the report warned that the recent gains in home prices are not likely to last.
But there was good economic news from overseas. Major European banks including UBS AG and Deutsche Bank reported strong earnings. The results came a few days after regulators evaluated banks across Europe to see which might have trouble surviving another economic downturn. Major European indexes rose following the earnings and another positive report on Germany's economy.
DuPont's stock rose $1.21, or 3.1 percent, to $40.20.
UBS shares trading in the U.S. rose $1.27, or 8.4 percent, to $16.42. Deutsche Bank jumped $1.59, or 2.4 percent, to $67.77.
Britain's FTSE 100 rose 0.3 percent, Germany's DAX index gained 0.2 percent, and France's CAC-40 rose 0.8 percent. Japan's Nikkei stock average earlier fell 0.1 percent.