NEW YORK -- Stocks declined yesterday as the Conference Board said consumer confidence fell in October and weak technology issues pushed down Nasdaq stocks.
"The consumer confidence number was below the street expectations by a pretty good percentage," said Thom Brown, managing director at Rutherford, Brown & Catherwood in Philadelphia.
The Conference Board said its consumer confidence index dropped to 59.4 this month from 63.8 in September. Analysts had expected the index to rise to 65.0.
"It could have an impact on the retail area and on the banking area," Mr. Brown said. "If the confidence just isn't there, then people aren't going to borrow to buy houses" and other durable goods.
Technology stocks fell as BMC Software Inc. reported sluggish international sales, even though International Business Machines Corp. reported third-quarter earnings that were better than expected.
The Dow Jones industrial average dropped 1.12, to 3,672.49, led by United Technologies Corp., Aluminum Co. of America and Eastman Kodak Co., after sliding as low as 3,654.05.
Stocks rebounded after long-term interest rates dropped when the bond market rallied, making stocks more attractive than fixed-income securities.
The Dow industrials climbed 24.31 Monday, to a record 3,673.61, as stocks sensitive to the economy surged amid various reports indicating a faster economic recovery.
The Standard & Poor's 500 index rose 0.10 yesterday, to 464.30, as stronger chemical, auto, electrical equipment and paper stocks offset weak bank and financial, retail and drug issues.
The Nasdaq Combined Composite Index dropped 4.29, to 765.46, driven by declines in Microsoft Corp., MCI Communications Corp., Oracle Systems Corp., Amgen Inc. and BMC.
Volume on the Big Board advanced to 284.5 million shares from 257.1 million Monday. Nine common stocks fell on the New York Stock Exchange for every seven that rose.
BMC put "a lot of pressure on these technology issues again," said David Butler, head of equity trading at Kemper Financial Services in Chicago. Technology stocks "cracked, and brought the whole market down" weeks ago; "now they're under pressure again," he said.
BMC Software dropped $5.75, to $51.25. Fiscal second-quarter net income rose to 77 cents a share from 58 cents, but international sales rose 1 percent, disappointing analysts.
"Up until mid-October, what was driving the market was small-cap growth stocks," said Henry Otto, a managing director at Brandywine Asset Management in Wilmington, Del., who oversees $160 million in small stocks. If yesterday's consumer report "is a barometer of what's going to be coming forward, it's not good. Small caps in general are keyed to a better economy," he said.
Most other indicators, such as Monday's reports that September sales of existing homes and mid-October car sales increased more than expected, point to a stronger economy, however, and Mr. Otto said he has bought retailers such as Waban Inc. and Ross Stores Inc. recently.
IBM, up $1.375 at $46.25, reported earnings "a little bit better than the street expected," said Mr. Brown of Rutherford, Brown & Catherwood. IBM said it lost 12 cents a share in the third quarter, better than analysts' forecast of a 26-cent loss.
Others said part of yesterday's decline was a reaction to Monday's advance. "The Dow made a new high [Monday] in what was otherwise a sloppy market, and it's not unusual to have a pretty good down move after something like that happens," said Bill Beise, a partner at Wessels Arnold & Henderson in Minneapolis.
American Express Co. dropped $1.375, to $32.625. The credit card and travel company said its third-quarter earnings totaled 83 cents a share, reversing last year's 45-cent loss.
AlliedSignal Inc. fell 12.5 cents, to $72.75, after reporting that its third-quarter earnings rose to $1.19 a share from 95 cents last year, exceeding analysts' forecast of $1.16.
Pronet Inc. rose 87.5 cents, to $16.75, and Metrocall Inc. was unchanged at $22.25. The two providers of paging services are discussing a possible merger.
Nike Inc. was up 62.5 cents at $46.875. The maker of athletic shoes, whose stock has fallen 44.3 percent this year, might be a good bargain, money managers said.