Stocks catch breath after weaker confidence data, earnings

ByABC News
July 28, 2009, 6:38 PM

NEW YORK -- An economic reality check is putting the stock market rally back on hold.

Stocks ended mixed but little changed as unease over a weak consumer confidence was offset by an improvement in home prices. The Conference Board said confidence declined more than expected in July.

Investors worried that consumers' waning confidence and the rising unemployment rate would hamper the economy's ability to rebound from the longest recession since World War II. Decent demand at a government debt auction helped stocks pare their losses.

The Dow Jones industrial average fell 11.79, or 0.1%, to 9,096.72 after being down as much as 101 points. The broader Standard & Poor's 500 index fell 2.56, or 0.3%, to 979.62. The Nasdaq composite index rose 7.62, or 0.4%, to 1,975.51 after several technology companies announced acquisitions

If consumers don't step up spending, companies will find it hard to boost revenue. The recent string of stronger corporate profits have come from deep cost-cutting, which can only be used to lift earnings for so long.

But even without the consumer confidence report, analysts have been anticipating some pullback after the market soared 11% in just two weeks on surprisingly strong corporate profit reports. The latest run restarted a rally that began in March but faltered in mid-June on lackluster economic data.

Corporate earnings reports were mixed and left investors cautious. Office Depot said its second-quarter loss widened and results fell short of analysts' expectations and luxury handbag maker Coach said shoppers showed up at factory outlet stores but held off buying pricier items at U.S. department stores.

The third upbeat reading on the housing market since last week helped temper the market's disappointment. The S&P/Case-Shiller Home Price index indicated that home prices posted their first monthly increase since the summer of 2006. Prices in major metropolitan markets rose 0.5% in May from April.