Stocks turn higher as consumer confidence surges

NEW YORK -- Investors set aside some of their worries about the economy Tuesday after a closely watched measure of consumer confidence soared in April.

Stocks erased early losses as investors worrying about the spread of swine flu and the viability of banks took comfort from a Conference Board report that its consumer confidence index surged 12 points to 39.2 from a revised 26.9 in March.

The reading is the highest since November and far better than the 29.5 number that economists had expected. The report suggests consumers might be willing to spend more if confidence continues to build.

Stocks fell ahead of the confidence reading as investors worried that a growth in swine flu cases could hurt industries such as travel and tourism. The World Health Organization raised its alert to a phase 4 out of 6, saying the flu spreads easily but is not pandemic.

Banking troubles came back into the spotlight after The Wall Street Journal reported Tuesday that U.S. regulators told Bank of America and Citigroup the companies may need to raise more capital.

Government officials briefed the 19 biggest U.S. banks last week about "stress tests" they have conducted on them, but the results aren't expected to be made public until early May.

But the report on consumer confidence bolstered hopes that consumers not unemployed or struggling with debt might begin to step up their spending.

Later Tuesday, the Federal Reserve will begin its two-day meeting on interest rates. The Fed has already lowered its target rate to a range of zero to 0.25% and started buying Treasurys in an effort to keep market rates low. Investors are curious about the central bank's assessment of the economy, and whether it will accelerate its purchases of government bonds.

The swine flu gave investors reason to cash in recent gains Monday, and stocks pulled back moderately. The Dow remains up 22.6%, though, from the nearly 12-year low it reached in early March.

In overseas trading Tuesday, Japan's Nikkei stock average fell 2.7%. In afternoon trading in Europe, Britain's FTSE 100 fell 2.6%, Germany's DAX index fell 2.9% and France's CAC-40 fell 2.1%.