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rgloomy tuesday on wall st "BUCK IT"

Gloomy Tuesday on Wall St.
Dow loses nearly 200 points, Nasdaq falls over 2 percent as investors fear falling consumer confidence will pace report-heavy week.
By Steve Hargreaves, CNNMoney.com staff writer
May 30, 2006: 4:07 PM EDT


NEW YORK (CNNMoney.com) - Stocks went into a tailspin Tuesday, finishing at lows for the day as a falling consumer confidence report hit investors already anxious ahead of a week packed with economic news.

The Dow Jones industrial average (down 166.33 to 11,112.28, Charts) and the broader Standard & Poor's 500 index (Charts) both finished about 1.6 percent lower, according to early tallies. The tech-laden Nasdaq composite (down 41.50 to 2,168.87, Charts) tumbled over 2 percent.





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Here's what was moving markets near the close:

Tuesday's selloff looked like a continuation of the downturn the markets took earlier this month, when the Dow reached near record highs and then sold off roughly 5 percent over a two-week period on fears of rising inflation.

But Tony Dwyer, equity market strategist at FTN Midwest, said investors were waiting on the sidelines after last week's mini-rally that saw major gauges bounce back nearly 1 percent on signs the Federal Reserve might pause next month after raising interest rates for nearly two years.

"We got that, now what do you do," he said of the bounce last week. "There's not going to be a lot of buying going into a week flush with economic data."

Leading the decline Tuesday were financials and construction. The AMEX Securities Broker/Dealer Index and the Dow Jones Home Construction Index both fell over 2 percent.

Earlier Tuesday, the Conference Board said its reading on consumer confidence fell to 103.2 in May from a revised April reading of 109.8, which was a four-year high.

Although the reading came in above estimates, which were pegged at 100, one expert said the size of the drop was still unsettling.

"People knew the number was going to be down, but it's significantly lower than last month's," said Michelle Clayman, chief investment officer at New Amsterdam Partners. "The concern is that gas prices and interest rates are taking a toll on the consumer."

Consumer spending accounts for nearly 70 percent of the economy and some investors are worrying that with gas prices rising, and the housing market slowing down, a pullback could mean markedly slower economic growth ahead.

Those hoping consumers will get a little relief at the pump won't find it in Tuesday's oil prices. U.S. light crude for July delivery jumped 66 cents to $72.03 a barrel on the New York Mercantile Exchange.

Also making headlines Tuesday morning: News that President Bush has tapped Goldman Sachs CEO Henry Paulson to succeed John Snow as Treasury Secretary.

There had been speculation Paulson wasn't interested in the job and the pick came as a bit of a surprise, but Clayman said the choice shouldn't rattle investors too much.

"Clearly he's a very successful business man, he's certainly well respected in the business community," she said.

On the move
In corporate news, shares of General Motors were downgraded to a "sell" recommendation from a neutral rating by Deutsche Bank. GM (down $1.59 to $26.49, Research) shares fell nearly 5 percent.

The drop came after the troubled automaker rallied last week on upgrades by Merrill Lynch and Prudential.

Shares of Wal-Mart Stores (Research) fell over 2 percent after the world's No. 1 retailer said higher gas prices left its May sales gain at the low end of its earlier guidance. Wal-Mart and other major retailers are due to report May sales before the market open Thursday.

Shares of Kinder Morgan (Research) surged nearly 20 percent after senior management of the gas and oil pipeline operator announced plans late Monday to take the company private for $100 a share, a premium of about 18.5 percent over its closing price Friday. The deal would be worth $13.4 billion.

British telecom Vodafone reported a record $40.9 billion loss, although its U.S. shares (up $0.20 to $22.49, Research) rose over 1 percent as the company raised its dividend and the amount it planned to return to shareholders by $5.6 billion despite the loss.

Attention is also being paid to economic news due later this week.

The Fed is due to release minutes of its May 10 meeting Wednesday afternoon, and the anticipation of those minutes is already causing nervousness among investors.

Reports are also due on vehicle sales and productivity Thursday and the much awaited May jobs number due Friday.

Market breadth was negative. On the New York Stock Exchange, decliners beat advancers by a margin of three to one on volume of 1 billion shares. On the Nasdaq, losers also beat winners by a margin of three to one as 1.3 billion shares changed hands.

Treasury prices fell slightly, with the yield on the benchmark 10-year note at 5.08 percent, just above the 5.07 percent where they settled late Friday. Bond price and yields move in opposite directions.

The dollar fell against the euro and yen.

Major markets in both Asia and Europe took a hit Tuesday, with major European indexes down over 2 percent on fears of further interest rate hikes.

U.S. markets were closed Monday for Memorial Day.

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