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NEW YORK (AP) -- Evidence that consumers are still holding off on spending drove stocks lower Friday, tempering enthusiasm from the day before over the economy's growth in the third quarter.
Major stock indexes fell more than 0.5 percent in morning trading, giving back a chunk of the previous day's big gains.
Investors shed stocks after the Labor Department said personal spending fell 0.5 percent in September. Though the decline was in line with forecasts, it was the largest drop in nine months and followed a 1.3 percent jump in August fueled by the government's popular Cash for Clunkers car rebate program.
A drop in the mood of consumers was also discouraging. The Reuters/University of Michigan consumer sentiment index fell to 70.6 in October from 73.5 in September. The reading was revised slightly higher from a preliminary estimate of 69.4 earlier this month, and was roughly in line with expectations.
The market is paying close attention to indicators of consumer spending, which is still in a slump despite improvements in other parts of the economy such as manufacturing and housing. Spending by consumers makes up a major part of the U.S. economy.
The Labor Department also reported Friday that personal income, the fuel for future spending, was flat in September compared with the previous month, in line with expectations. A lack of income growth is due, in part, to ongoing high unemployment rates, also a major worry for the market.
On Thursday, investors cheered a government report that the economy grew at 3.5 percent in the third quarter after four straight quarters of declines. It was the most promising evidence yet that the longest recession since the 1930s ha! s ended. The news boosted the Dow Jones industrials 200 points - its best one-day performance since July. But many economists worry that much of GDP growth came from government stimulus measures and that weak spending by consumers will continue to hold the economy back.
"There's a lot of people out there thinking that if it wasn't for the stimulus we wouldn't have seen such a big number," said Todd Salamone, senior vice president of research at Schaeffer's Investment Research.
He said some investors may be reassessing the GDP number, believing that the market may have overreacted on Thursday.
In late morning trading, the Dow fell 80.41, or 0.8 percent, to 9,882.17. The Standard & Poor's 500 index fell 9.31, or 0.9 percent, to 1,056.80, and the Nasdaq composite index lost 11.80, or 0.6 percent, to 2,085.75.
Nearly three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 294.3 million shares, compared with 390.9 million at the same time a day earlier.
In other trading, the Russell 2000 index of smaller companies fell 7.78, or 1.3 percent, to 572.44.
Bond prices rose as stocks fell. The yield on the benchmark 10-year Treasury note fell to 3.45 percent from 3.50 percent late Thursday.
The dollar gained against other major currencies, making commodities less attractive to foreign buyers. Gold prices slipped about $6 to $1,040 an ounce on the New York Mercantile Exchange, while oil prices tumbled $1.52 to $78.35 a barrel.
With GDP coming in stronger than expected, analysts said investors will likely turn their attention to next week's October employment report for the next indicator of how the economy is doing. Another big loss in jobs could upset the market's optimism.
"We need a follow-through now," said Bryan Place, president of Place Financial! Advisor s in Manlius, N.Y. "How much of that (growth) is continued if jobs don't follow behind it?"
Overseas, Japan's Nikkei stock average rose 1.5 percent. In afternoon trading, Britain's FTSE 100 fell 0.5 percent, Germany's DAX index dropped 1.2 percent, and France's CAC-40 declined 1.2 percent.
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