Stock market ends flat on mixed economic data, earnings

NEW YORK -- An economic reality check is cooling the stock market's rally.

Stocks ended little changed Tuesday as a key barometer of consumer confidence and a handful of disappointing earnings reports reminded investors that an economic recovery this year is far from assured. The Dow slipped 12 points, while the Nasdaq composite index posted a small gain.

Trading was more erratic Tuesday than the past two days, but on all three days the major market indexes closed with only modest changes. Investors remain cautious but still aren't willing to give up on a rally that has propelled stocks up 11 percent in little more than two weeks.

Stocks started to slip after the Conference Board reported that its consumer confidence index fell more than expected, fanning worries that bleak expectations among consumers and rising unemployment would hamper the economy's ability to rebound from the longest recession since World War II.

Meanwhile, corporate earnings reports, which beat meager expectations earlier this month, suggested that many consumers remain unwilling or unable to spend. Office Depot Inc. and handbag maker Coach Inc. both had trouble drawing in customers during the second quarter.

If consumers don't step up spending, companies will find it hard to chalk up the revenue gains they need to truly recover. The recent string of stronger corporate profits have come from deep cost-cutting, which can only lift earnings for so long.

The third upbeat reading on the housing market since last week and dealmaking in the technology industry helped temper the market's disappointment.

Even without the latest worries about consumers, analysts have been anticipating some pause in buying after this month's surge, which restarted a massive rally that began in March. The advance fizzled in mid-June on lackluster economic reports.

John Merrill, chief investment officer of Tanglewood Wealth Management in Houston, said some institutional investors are pouring money into stocks in an effort to keep pace with a 44.8 percent rally in the S&P 500 index since March 9 and not get left behind.

"That kind of gives a nice give-and-take with nobody motivated to strongly sell and nobody motivated to strongly buy," he said.

The Dow finished down 11.79, or 0.1 percent, to 9,096.72 after being down as much as 101 points. It was the blue chips' first loss after four days of gains and only the fifth down day of the month.

The broader Standard & Poor's 500 index fell 2.56, or 0.3 percent, to 979.62. The Nasdaq composite index rose 7.62, or 0.4 percent, to 1,975.51 after several technology companies announced acquisitions.

Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where consolidated volume came to 5.6 billion shares, compared with 4.7 billion Monday.

Bond prices were mixed after a Treasury Department auction of two-year notes generated lackluster demand. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.73 percent.

Investors are anxious about government debt auctions because weak demand could force Washington to entice buyers with higher interest rates. That could hurt an economic rebound by increasing borrowing costs for consumers.

Adam Gould, senior portfolio manager at Direxion Funds in New York, said the rally remains intact because investors are jumping in when stocks retreat. That helped pull stocks off their afternoon lows.

"There are lot of people that missed this rally," he said. "When it looks like it's not selling off anymore guys start rushing in."

Office Depot said consumers and small businesses continued to pare spending, especially on pricier items like furniture and computers. The office-supply chain tumbled 97 cents, or 18.1 percent, to $4.38.

Coach fell 38 cents to $28.05 after earnings dropped 32 percent.

Not all the news was downbeat. Textron Inc. jumped $1.96, or 17.6 percent, to $13.11 after the maker of Cessna planes and Bell helicopters posted a profit excluding charges. Analysts had expected a loss.

Investors welcomed dealmaking in the tech industry. IBM Corp. agreed to acquire software maker SPSS Inc. for $1.2 billion. SPSS jumped $14.36, or 40.9 percent, to $49.45, while IBM fell 35 cents to $117.28.

The dollar was mixed, and gold prices fell.

Light, sweet crude fell $1.15 to settle at $67.23 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 1.07, or 0.2 percent, to 551.95.

Overseas, Britain's FTSE 100 fell 1.3 percent, Germany's DAX index lost 1.5 percent, and France's CAC-40 slid 1.2 percent. Japan's Nikkei stock average slipped less than 0.1 percent.