Stocks Slump as Consumers Fret, Greece Dithers

[Stocks-to-Watch]

American consumers have been in a sunny frame of mind, with sentiment rising to its highest level in almost a year last month. But the February gauge slid to 72.5 from 75, and the index tracking consumer expectations slid to 68 from 69.1.

The Dow fell about 120 points in morning trading; the market has already in bear mode before sentiment numbers were released because Greek leaders are still figuring out how to meet EU demands for austerity measures.

While employment and manufacturing numbers point to improvement in the U.S. economy, some observers worry that the recovery at the end of last year may have been overstated. For one thing, an increase in consumer spending may have been spurred by more Americans taking on debt. That’s not necessarily sustainable.

“The first estimate of fourth quarter GDP was a bit of a disappointment, although it was still the best quarterly result for the year.* Increasingly, it appears that the increase in consumer spending late in 2011 wasn’t as significant as initially believed,” wrote Jim Baird, Partner and Chief Investment Strategist for Plante Moran Financial Advisors.

That said, consumer sentiment is still relatively strong.

“The result is a collective consumer mood that has improved considerably in the past year, but still constrained by the overall lackluster pace of improvement in economic conditions,” Baird wrote.



Original Article Source by Barrons.com