Stocks mixed as recession fears grow

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NEW YORK -- Wall Street was mixed Tuesday after a disappointing reading on consumer sentiment punctured some of the market's optimism of the past two sessions.

The market was reminded of the economy's ongoing problems when the Conference Board, a business-backed research group, said its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February. The reading -- a five-year low -- was far below the 73.0 expected by analysts surveyed by Thomson/IFR.

Investors also weighed a report on the housing sector showed a further pullback in home prices. The Standard & Poor's/Case-Shiller index shows U.S. home prices declined 11.4% in January from a year earlier.

Tight credit markets, rising prices and declining housing prices have consumers worrying about a recession. And, the stock market is in turn worrying that consumers will cut back their spending and further weaken the economy.

"What is troubling is that consumer confidence took a plunge, and I think we're going to see consumer spending weaken as we go forward," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners.

In addition, he said some profit-taking was to be expected on Wall Street after a two-day rally sent the Dow Jones industrial average up nearly 450 points. Stocks had charged higher in the days following the Federal Reserve's decision to aid investment banks and orchestrate a buyout deal for a near-collapsed Bear Stearns Cos.

In midday trading, the Dow fell 54.71, or 0.44%, to 12,493.93.

Broader indexes were mixed. The Standard & Poor's 500 index dropped 1.14, or 0.08%, to 1,348.74; and the Nasdaq rose 2.72, or 0.12%, to 2,329.47.

Bond prices rose. The yield on the benchmark 10-year Treasury note fell to 3.48% from 3.55% late Monday. The dollar was mixed against other major currencies, while gold prices rose.

Concerns about consumer sentiment also drove down the price of oil, which in recent days remained over $100 a barrel. Light, sweet crude fell 33 cents to $100.53 a barrel on the New York Mercantile Exchange.

The mood on Main Street is key as consumer spending makes up about 70% of economic activity. Investors worry that consumers uneasy about the economy and their financial well-being are more likely to pare their spending.

The readings come a day after a surprise uptick in sales of existing homes helped send the Dow up 187 points.

In corporate news, JPMorgan Chase & Co. shares fell $1.16, or 2.6%, to $45.32 after a securities analyst said the bank will end up paying about $65 per share for Bear Stearns. That amount, which includes costs to bring the two companies together, was labeled too high a price for a "deeply troubled company," the Punk, Ziegel & Co. analyst said.

Bear Stearns fell 45 cents to $10.80 -- just above the $10 per share buyout price being offered by JPMorgan. There has been some speculation in the market that a higher offer might come before the deal closes.

Shares of Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. fell as Wall Street considers what a combined Sirius and XM would look like. The Justice Department approved Sirius' $5 billion buyout of XM on Monday.

XM slid 22 cents to $13.57; while Sirius fell 2 cents to $3.12.

Yahoo Inc. rose 89 cents, or 3.2%, to $28.41 after on speculation Microsoft Inc. will raise its takeover price for the Internet company beyond $31 per share. Microsoft fell 14 cents to $29.03.

The Russell 2000 index of smaller companies fell 0.04, or 0.01%, to 701.24.

Advancing issues barely outnumbered advancers on the New York Stock Exchange, where volume came to 539.7 million shares.

Investors overseas remained upbeat following the U.S. rallies Monday and last week. Japan's Nikkei stock average finished up 2.12%. In afternoon trading, Britain's FTSE 100 fell 0.27%, Germany's DAX index rose 3.14%, and France's CAC-40 rose 3.11%.
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