Wednesday, January 28, 2009

Weak consumer confidence stalls gain in stocks

NEW YORK (AP) -- Another drop in consumer confidence deflated Wall Street's budding optimism about the economy Tuesday, forcing stocks to give up an early advance.

The major indexes were little changed after the Conference Board said its Consumer Confidence Index in January slipped to its lowest level since the reading's inception in 1967. The market was rising earlier after big companies like United States Steel Corp. and American Express Co. managed to post profits in a difficult recession.

But the report indicated that consumers, who have already cut back drastically, are likely to remain reluctant to spend in the coming months. The index from the private research group slipped to 37.7 in January from a revised 38.6 in December.

Profit reports from U.S. Steel and American Express as well as chip-maker Texas Instruments Inc. and movie-rental company Netflix Inc. did give the market some support. Even modest earnings were a welcome reminder for investors that some companies are still able to make money despite the worst recession in decades.

U.S. Steel, the largest U.S.-based steel producer, said its fourth-quarter earnings jumped as an acquisition boosted results. Meanwhile, American Express reported profits fell 79 percent in the final three months of 2008. But the numbers weren't as weak as some investors had feared.

Texas Instruments said its earnings fell 86 percent and that it would slash 3,400 jobs as the maker of chips for cell phones and other products tries to cut costs. Wall Street applauded the company's move to reduce expenses.

Netflix said its fourth-quarter profit jumped 45 percent on strong subscriber growth.

But there were some earnings disappointments.

Verizon Communications Inc. said its earnings rose 15 percent in the fourth quarter as the telecommunications company added wireless and broadband subscribers. But revenue fell short of Wall Street's forecast and investors worried about profit margins.

Chemicals maker DuPont Co. said it swung to a fourth-quarter loss because of a hefty restructuring charge.

Dave Rovelli, managing director of trading at brokerage Canaccord Adams, said investors appeared relieved by the U.S. Steel numbers because the company's results could signal the overall economy isn't as weak as some investors believed. Demand for raw materials like steel is examined as an early indicator of economic activity.

In midmorning trading, the Dow Jones industrial average rose 7.09, or 0.09 percent, to 8,123.12 after being up 85.

Broader stock indicators also showed modest gains. The Standard & Poor's 500 index rose 2.82, or 0.34 percent, to 839.39, and the Nasdaq composite index rose 7.07, or 0.47 percent, to 1,496.53.
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