NEW YORK – Stocks retreated from 13-month highs after a lackluster reading on consumer confidence and a report showing slower economic growth sapped the market's optimism.
Major stock indexes fell more than 0.5 percent in early trading Tuesday after the Conference Board said its Consumer Confidence Index increased slightly to 49.5 in November, up from a revised reading of 48.7 in October. While better than expected, the report indicates that consumers remain gloomy heading into the holiday season. A reading above 90 means the economy is on solid footing, and one above 100 signals strong growth.
Stocks had been falling prior to the report after the government said the economy grew at a slower pace in the third quarter than originally reported.
The Commerce Department said the nation's economy grew at a 2.8 percent rate in the third quarter, down from an initial estimate of 3.5 percent — fresh evidence that while a recovery is under way, it is likely to be slow and bumpy.
The decline in stocks came after a big rally Monday carried the Dow Jones industrials up 133 points to its highest level in just over a year. A weakening dollar and an upbeat report on housing lured investors back into stocks after a three-day losing streak. The dollar bounced back on Tuesday, hurting stock market sentiment.
The dollar's weakness has been a big driver behind higher stock prices this year. Investors have been taking advantage of record-low interest rates to invest in assets other than cash that can earn them better returns.
As the end of the year approaches, however, investors have become hesitant to take on more risk and potentially upset the big gains they've amassed since the stock market began rallying in March. That desire for safety helps push up the dollar and other safe-harbor investments like Treasurys at the expense of the stock market.
Analysts expect trading to be choppy this week amid light trading volume heading into the Thanksgiving holiday.
The Dow fell 68.02, or 0.7 percent, to 10,382.93. The Standard & Poor's 500 index lost 6.39, or 0.6 percent, to 1,099.85, while the Nasdaq composite index fell 16.71, or 0.8 percent, to 2,159.30.