Bad News Times Three

Firefighters battle a wildfire Wednesday, April 18, 2007, near Waycross, Ga. AP

At one American mall Tuesday, shoppers lent faces and voices to the ebbing consumer confidence reported earlier in the day.

"Lately … I've noticed a lot of people are being laid off," said one woman.

"I feel the next few months are going to be shaky. And I feel it's definitely a time to watch and to be cautious," said another.

They are not alone, reports CBS News Business Correspondent Anthony Mason. The Conference Board Tuesday said a bleak employment outlook and weakening business conditions pushed the overall consumer confidence index down for the fifth straight month to 106.8 from a revised 115.7 reading in January.

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  • The almost nine point drop was sharper than Wall Street analysts expectations for a 109.6 level, compared with a previously reported 114.4 January reading. The last time the index was this low was June 1996, when it was 100.1.

    Despite the sharpness of the decline, the private research group said the index remains above recessionary levels.

    But that was only one of three reports released Tuesday carrying bad economic news.

    The number of new, single-family homes sold in January fell 10.9 percent to an annual rate of 921,000 after reaching a record 1.034 million annual rate in December, reflecting declines in every region across the nation, the Commerce Department said. It was the largest monthly decline since a 23.8 percent drop in January 1994.

    The Commerce Department also said orders to U.S. factories for big-ticket manufactured goods plunged six percent in January. Durable goods orders overall were at their lowest level in 19 months. The decline was larger than expected, with much of te decrease centered in the volatile aircraft category.

    The bad economic news came as President Bush prepared to outline his budget plan in an address before a joint session of Congress. And it arrived exactly three weeks before the next scheduled meeting of the Federal Open Market Committee, the Federal Reserve's interest rate-setting body.

    While Fed Chairman Alan Greenspan may have already lowered interest rates a full percentage point, the new numbers show the economy and consumers have yet to respond.

    "So despite aggressive Fed action, despite talk of tax cuts, consumer confidence and investor confidence still seems to be eroding in here," said Stephen Slifer, chief economist at Lehman Brothers.

    Rumors have been rampant for days that another rate cut is imminent. Greenspan testifies on Capitol Hill again Wednesday and Wall Street is hoping the fed chairman will drop a hint those rate cut rumors are right.

    Even the hint of a rate cut could stimulate slacking growth.

    "In the end, it's a confidence game. If consumers and business people don't have the faith, then they're simply not going to go out and spend," said Slifer.

    Sour Stats Sink Stocks
    Wall Street didn't like the sound of the economic statistics released Tuesday.

    The Nasdaq Composite Index sank 100.68 points, or 4.36 percent, to finish at 2,207.82, its lowest close since Jan. 3, 1999.

    The Dow Jones industrial average inched down 5.65 points, or 0.05 percent, to end at 10,636.88. The broader Standard & Poor's 500 Index declined 9.71 points, or 0.77 percent, to 1,257.94, within flirting distance of a two-year low.

    Wall Street is worried the faith is gone. The new numbers drove the technology-laced Nasdaq Composite Index down more than 4 percent, off 100.68 points, 2,207.82. The Dow Jones industrial average slipped 5 points, to 10,636.88. The broader Standard & Poor's 500 Index lost 9.71 points, to 1,257.94.

    But in a vicious cycle, Wall Street's woes are having their own effect on confidence. In Franklin Lakes, N.J., Ron Aveta — who builds swimming pools in some of the bigger new homes — said his business is "booming, but slowing."

    While Aveta is still busy filling last years orders, soe of his customers have become uneasy.

    "The last couple of weeks we've had two cancellations because of money," Aveta said. "And we will allow them to cancel because they've lost a lot of money at the moment in the stock market."



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    • CBSNews.com staff CBSNews.com staff

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