Stocks End Flat on Mixed Economic Data, Earnings

An economic reality check is cooling the stock market's rally.

Stocks ended little changed Tuesday as a key barometer of consumer confidence and a handful of disappointing earnings reports reminded investors that an economic recovery this year is far from assured. The Dow slipped 12 points, while the Nasdaq composite index posted a small gain.

Trading was more erratic Tuesday than the past two days, however in all three days the major market indexes closed with only modest changes. Investors remain cautious but still aren't willing to give up on a rally that has propelled stocks up 11 percent in little more than two weeks.

Stocks started to slip after the Conference Board reported that its consumer confidence index fell more than expected, fanning worries that bleak expectations among consumers and rising unemployment would hamper the economy's ability to rebound from the longest recession since World War II.

Meanwhile, corporate earnings reports, which beat meager expectations earlier this month, suggested that many consumers remain unwilling or unable to spend. Office Depot Inc. and handbag maker Coach Inc. both had trouble drawing in customers during the second quarter.

If consumers don't step up spending, companies will find it hard to chalk up the revenue gains they need to truly recover. The recent string of stronger corporate profits have come from deep cost-cutting, which can only lift earnings for so long.

The third upbeat reading on the housing market since last week and dealmaking in the technology industry helped temper the market's disappointment.

Even without the latest worries about consumers, analysts have been anticipating some pause in buying after this month's surge, which restarted a massive rally that began in March. The advance fizzled in mid-June on lackluster economic reports.

John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said some institutional investors are pouring money into stocks in an effort to keep pace with a 44.8 percent rally in the S&P 500 index since March 9 and not get left behind.