Americans fretting about the economy

NEW YORK — Consumer confidence soured in May, as Americans fretted about the overall economy's future and the job outlook.

The drop in a widely watched barometer of sentiment was the steepest since hurricanes pummeled the Gulf Coast last year, increasing worries about the health of consumer spending. Stocks plummeted on the news.

The New York-based Conference Board said Tuesday its consumer confidence index fell almost seven points to 103.2, down from a revised 109.8 in April. Still, May's reading was better than the 100.9 expected by analysts.

The decline stalled a rebound seen since November in the aftermath of last year's Gulf of Mexico hurricanes, which sent the index down 18 points in September. The exception was a dip in February when short-lived pessimism over the job market hurt consumer sentiment.

"Consumer confidence, which reached a four-year high in April, lost ground in May," said Lynn Franco, director of the New York-based Conference Board Consumer Research Center, in a statement. "Apprehension about the short-term outlook for the economy, the labor market and consumers' earning potential has driven the Expectations Index down to levels not seen since the aftermath of the hurricanes last summer."

Still, Franco said, consumers rate current conditions favorably.

The Expectations Index, which measures consumers' outlook over the next six months, fell to 83.7 in May from 92.3 in April. In fact, the proportion of consumers expecting their incomes to rise in the months ahead fell to the lowest level in three years, the survey reported. The Present Situation Index, which measures how shoppers feel now about economic conditions, slipped to 132.5 from 136.2.

Economists closely monitor consumer confidence because consumer spending accounts for two thirds of all U.S. economic activity.

Souring confidence, along with a jump in oil prices and a lackluster sales report from Wal-Mart Stores Inc., sent the Dow Jones industrial average plunging 184.18, or 1.63 percent, to 11,094.43, giving back all of the 180 points it gained in last week's runup. The Dow lost 214 points on May 11, its biggest one-day decline in three years.

Broader stock indicators retreated sharply. The Standard & Poor's 500 index dropped 20.32, or 1.59 percent, to 1,259.84; the Nasdaq composite index plunged 45.63, or 2.06 percent, to 2,164.74, falling back into negative territory for 2006.