NEW YORK — The stock market fell sharply Tuesday after a surprising drop in consumer confidence reminded investors of the fragility of the economic recovery.
The Dow Jones industrials fell 100 points. Interest rates also fell in the bond market as investors moved money out of stocks and into the safety of Treasurys.
The Conference Board said its consumer confidence index fell to 46 in February from 56.5 last month. That was well below the forecast of economists polled by Thomson Reuters. They expected a reading of 55.
Not only did the index fall sharply, it is far from indicating strength in the economy. A reading above 90 means the economy is on solid footing. Consumers are vital to a strong, sustained economic recovery because their spending accounts for more than two-thirds of all economic activity.
The confidence numbers came as investors were already rethinking the more optimistic assessment they had of the economy last week. Stocks had rallied for four straight days on upbeat earnings news, including some from retailers, and on improving housing and manufacturing numbers.
That rally has ended this week in response to a growing pile of disappointing consumer news, including retail earnings reports. While Home Depot Inc., Sears Holdings Corp., Macy’s Inc. and Target Corp. all reported better-than-expected earnings Tuesday, the companies indicated that sales growth is lagging. That’s a sign that consumers are still too hesitant about the economy and their own job security to spend freely.
Stocks have been volatile during the first two months of the year, alternating between multi-week stretches of gains and losses. Stocks rallied the past two weeks on signs of domestic growth after a nearly monthlong drop because of worries that European debt problems would upend a global economic recovery.
The Chicago Board Options Exchange’s Volatility Index, which is known as the market’s fear gauge, shot up 7.2 percent Tuesday. An increase in the VIX signals that investors are prepared for swings in the market.