Stocks inch lower as flu, banking news counter improved consumer outlook

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 consumers have improved their outlook.

A closely watched measure of consumer confidence jumped in April, pulling stocks off an early slide as investors grew hopeful that a better outlook among spenders would translate into bigger cash register receipts.

But stocks ended with modest losses after fluctuating throughout the day. Worries that large banks might need more capital and the spread of swine flu countered the news that the Conference Board's consumer confidence index surged this month to its highest level since November.

IBM's decision to boost its dividend and spend more to buy back stock gave the market another shot of confidence, but an afternoon rally petered out in the last hour to leave major market indicators just barely in the red.

The Dow Jones industrial average slipped 8.05, or 0.1%, to 8,016.95 after being down as much as 86 ahead of the consumer confidence report.

Broader stock indicators also lost ground. The Standard & Poor's 500 index fell 2.35, or 0.3%, to 866.16, and the Nasdaq composite index fell 5.60, or 0.3%, to 1,673.81.

Consumers worried about falling home prices, rising unemployment and a slumping stock market have been reluctant to spend since troubles with the economy intensified last fall. Since March some reports on home sales and demand at factories have indicated the economy is starting to stabilize, helping to send stocks up more than 20% and build confidence among investors and consumers alike.

Todd Leone, managing director of equity trading at Cowen & Co., said investors have been growing more upbeat about prospects for the economy. That optimism followed a string of better-than-expected readings and has driven a market rally since early March.

"People aren't as afraid as they have been. We're definitely seeing more money come back into the market," he said.