Stocks inch lower on flu, banking news

NEW YORK -- Stocks closed modestly lower Tuesday as concerns about swine flu and worries that major banks may need to raise more money offset a dividend hike at IBM and reassuring data that could signal a bottom in the economic cycle.

Stocks erased early losses as investors 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.

IBM was a bright spot for the Dow after its board approved a 10% increase in its dividend and authorized a stock buyback, underscoring strength amid a tough economic climate.

At the close of trading, the Dow Jones industrial average was 8 points, or 0.1%, to 8,017. The Standard & Poor's 500 Index fell 2, or 0.3%, to 855. The Nasdaq composite fell 6 points, or 0.3%, to 1,674.

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.

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%.