Stocks fall despite GM earnings, consumer confidence

NEW YORK -- Wall Street showed further signs of stability Tuesday, rising sharply on strong earnings at General Motors Corp. and Sun Microsystems Inc. even as investors grappled with a batch of mixed economic data.

General Motors Corp. earned $891 million in the second quarter, a huge reversal from the $3.4 billion loss it posted in the same period last year and the third straight quarterly profit for the nation's largest automaker.

GM said Tuesday the latest results reflected improved sales in growing international markets.

Also Tuesday, the New York-based Conference Board said consumer confidence hit a six-year high in July as Americans shrugged off falling home prices to focus on a healthy jobs market, instead.

Its Consumer Confidence Index rebounded to 112.6, its highest level since August 2001 when it recorded a 114.0 reading. That compared to a revised 105.3 in June. The July 24 cutoff for the preliminary survey was completed before last week's stock market tumble, however.

Also, U.S. oil surged more than $1 past $78 a barrel Tuesday, near its all-time high on expectations of falling U.S. crude inventories and a recovery in global stock markets.

While prices at the pump have declined recently, they are still higher than a year ago and are expected to tick up after the Labor Day weekend.

"It is encouraging in light of high energy prices, volatility of the stock market and the weak housing market that consumers didn't flinch," said Mark Vitner, senior economist with Wachovia Securities in Charlotte, N.C. "My general sense is that the economy is finding its footing."

The stock market's rebound this week follows last week's sharp pullback, which was fueled by persistent worries that a deteriorating lending environment will make it harder for companies to borrow money.

"The bottom line is volatility has picked up, and it's going to continue to pick up," said Jeff Schappe, chief investment officer at BB&T Asset Management, adding that there's potential for the market to drop another 5 percent. Last week, the Dow Jones industrial average tumbled about 5 percent from its record close of 14,000.41, reached earlier in July.

In another report issued Tuesday, the Commerce Department's year-over-year core personal consumption expenditures -- a closely watched inflation measure -- was up 1.9 percent in June, yet within the Federal Reserve's comfort zone. The report also showed that personal spending last month rose 0.1 percent, its slowest pace in nine months.