Scared Consumers Are Sinking the Dow

When consumers blink, investors get nervous. That's the simple message from today's early stock-market moves, as the latest reading on consumer sentiment fell to levels not seen for nine months. Moreover, with retail sales falling 0.4% last month and previous readings revised downward, consumers are clearly feeling a bit overextended in light of uncertainties regarding employment, government spending, and general economic growth. The impact on stocks was fairly muted, but it nevertheless pulled the Dow Jones Industrials (DJINDICES: ^DJI  ) off their record highs for a loss of 53 points, or 0.36%, by 10:55 a.m. EDT. The S&P 500 has suffered a larger decrease of 0.73%.

Somewhat surprisingly, though, that negative sentiment didn't make its way into consumer and retail stocks. Hope improvement retailer Home Depot (NYSE: HD  ) was the biggest gainer in the Dow early on, rising 1.6% and hitting another all-time high after getting an upgrade from analyst firm Jefferies. The environment for construction-related stocks has been so strong in light of the rebound in housing that former Home Depot division HD Supply filed for a $1 billion initial public offering, having gone private back in 2007. The enthusiasm suggests that investors aren't convinced that weak consumer sentiment will persist for long.

On the other hand, the weakness continued in the technology sector. Cisco Systems (NASDAQ: CSCO  ) has fallen almost 2% after posting sizable gains on each of the past three days. The company will face ongoing challenges in competing against a broader range of tech rivals, all of which are seeking to expand their customer offerings to meet the full range of IT needs, including Cisco's core networking services. But arguably, the bigger concern is that overall tech spending might fall if the economy slows down markedly.

Beyond the Dow, Hudson City Bancorp (NASDAQ: HCBK  ) has dropped more than 5% after the bank and its proposed acquirer, M&T Bank (NYSE: MTB  ) , said there would be a delay in completing their merger. M&T, which has slipped almost 4%, cited regulatory concerns from the Federal Reserve over its bank secrecy and anti-money-laundering programs. Despite the two banks' plan to extend their agreement until the end of January 2014, they aren't sure the merger will be complete even by then. Shareholders will still vote on the deal later this month, but the delay has to be disconcerting for investors on both sides.

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