The Dow Jones industrial average ended down 30.45 points, or 0.30%, to 10,115.26. The tech-heavy Nasdaq composite index shed 3.02 points, or 0.17%, to 1,766.86. The broader Standard & Poor's 500 index slipped 0.06 points, or 0.01%, to 1,109.38.
The Conference Board's consumer confidence index dipped to 94.1 in February, down from a revised 97.8 in January. S&P economists expected the index to come in around 97.0. Though consumers' views on present conditions and future expectations weakened, the reading still reflects a solid consumer.
The January decline isn't necessarily the beginning of a trend, but for months market watchers have feared that the consumer, who has buttressed a sagging U.S. economy, may be retrenching. Meanwhile, plenty of other factors are keeping stocks volatile. Investors are fretting over recent accounting concerns and the depth of a rebound in profits.
Early in the session a rumor about U.S. special forces landing in Iraq contributed to selling. A Pentagon official has since said the rumor is untrue, according to media reports.
Markets will be watching Federal Reserve Chairman Alan Greenspan's testimony on monetary policy Wednesday. When he last spoke before Congress, the Fed chief expressed cautious optimism that the economy is on the mend.
Any good news in key economic indicators should help the market for the rest of the week. A report on January durable goods orders are due Wednesday. Orders are expected to be higher for the month. On Thursday, the markets will get a revision to gross domestic product. Analysts are predicting a rise to around 0.8%, up from the 0.2% initial read.
On Friday, the latest read on a key manufacturing index, the ISM index, will be released. Analysts expect the index will indicate growth for the first time since July, 2000.
Investors will keep a close eye on Robertson Stephens' annual technology conference, which runs through Thursday. Hewlett Packard's (HWP
) analyst meeting this week will be also be carefully scrutinized. The company posted a large upside earnings surprise just a few weeks ago.
Earnings reports from several big-name retailers are due over the next several sessions: Gap Stores (GPS
), expected Wednesday, and discount chain Target (TGT
), due on Thursday.
Markets on Tuesday also sorted through plenty of earnings updates. On the tech front, contract manufacturer Flextronics (FLEX
) warned that its pro forma profits would miss forecasts for the current quarter, but it said it would meet its revenue guidance. The company cited weakness in telecom customers for the shortfall.
No. 1 home improvement retailer Home Depot (HD
) said fiscal fourth-quarter earnings rose 53% amid a strong housing market and mild weather. On Monday Lowe's Cos. (LOW
), the second-largest player in the industry, reported a similar increase in profit for its fourth quarter.
Other retailers showed strength. Federated Dept. Stores (FD
) gained ground after reporting a fourth-quarter profit from operations that beat expectations. The company guided lower for the first quarter. Shares in home goods retailer Pier 1 Imports (PIR
) jumped after raising earnings forecasts for the fourth quarter on higher sales of full-priced merchandise and cost-management efforts.
The latest consumer confidence data helped U.S. Treasuries make a comeback earlier in the session, though bond prices ended lower ahead of Greenspan's comments Wednesday. The Fed chairman is scheduled to discuss the economy and monetary policy in front of the House. The bond market is wary of possible optimistic remarks on the economy from the Fed chief, says S&P's economic research unit MMS.
European stock markets finished higher, aided by a rise in Germany's Ifo business climate index. The increase suggests that the European economy will recover faster than expected. In London, the FTSE 100 index ended higher by 38.30 points, or 0.75%, to 5,139.00. In Germany, the DAX index finished up 34.21 points, or 0.70%, to 4,897.75. In France, the CAC 40 finished up 35.42 points, or 0.82%, to 4,340.86.
Asian markets ended mixed. In Japan, the Nikkei fell 93.84 points, or 0.91%, to 10,202.63, amid weakness in shares of banks. In Hong Kong, the Hang Seng gained 51.11 points, or 0.49%, to 10,547.13.