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Nation's confidence sliding

So says the Conference Board, which found consumers' outlook at its lowest point in two years.

Worries about future job growth and the economy pushed consumer confidence in December to its lowest level in two years, an industry group said Thursday.

Economists said the decline in the Conference Board's Consumer Confidence Index is an indication that consumer spending will continue to slow and hints at future troubles for U.S. businesses.

"It's just not as positive an outlook as had been the case in the summer and fall," said Kathleen Camilli, director of economic research at Tucker Anthony Sutro. "One would have to conclude it's the impact of the stock market on people's perceptions. It's also the impact on employment, because employment conditions in some parts of the country are starting to deteriorate."

The Consumer Confidence Index fell to 128.3, slightly below analysts' expectations. It was the third straight month of decline for the index and a drop-off from the revised 132.6 reported in November.

"While the overall index continues to signal economic growth, albeit at a slower pace, the continued decline in expectations is somewhat disconcerting," said Lynn Franco, director of the Conference Board's Consumer Research Center. "If expectations continue on this downward trend, a more severe slowdown may be on the horizon."

The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator because consumer spending accounts for about two-thirds of the nation's economic activity. The index compares results to its base year, 1985, when it stood at 100.

Despite the confidence report, stocks moved higher Thursday as bargain hunting led to solid gains in the Dow industrials.

The Dow Jones Industrial Average climbed 65.60 to close at 10,868.76. The Nasdaq Composite Index, which fluctuated throughout the day, rose 18.41 to 2,557.76, and the Standard & Poor's 500 index advanced 5.30 to 1,334.22.

Gains were limited to stocks that inspired some confidence in investors _ who also continued selling companies, high-techs especially, with a weak earnings outlook.

Another factor in Thursday's session was window dressing, an end-of-quarter attempt by mutual fund managers and other institutional investors to make their holdings look better by dumping poor performers and picking up hot stocks.

"People are just straightening out their portfolios . . . getting rid of their losers," said Barry Hyman, chief investment strategist for Weatherly Securities.

A big question on Wall Street is whether the Nasdaq will be able to end the year on a three-day winning streak. Since Labor Day the tech-focused index hasn't seen better than two straight upward sessions.

If stock market history repeats, Friday will be a winner as investors wrap up tax-related selling and move on to bargain hunting, said Ricky Harrington, technical analyst for Wachovia Securities.

"Historically, the last day of the year has an 85 percent chance of being an up day," Harrington said.

Harrington also predicted the market won't be deprived of its annual January effect, the phenomenon when money comes back into the market after investors have sold stocks in December for tax purposes. He said investors are likely to use the money to snatch up deals in the beaten-down technology sector, off about 40 percent for the year.

"Once we get into January, we might have a whole change of character in the market," Harrington said. "You have a very good chance of a very rigorous technical rebound in so many of these battered stocks."

Consumer confidence has fallen sharply since the index recorded 142.5 in September. The last time the index fell below 128.3 was in December 1998, when it measured 126.7, said Franco with the consumer research center.

"We've seen indications that the overall economic pace is cooling, and this is just one more piece," she said, noting that the timing of the survey may have influenced the results. "Our cut-off date was shortly after the presidential decision was rendered and we think that oil prices and the fact that it looked like it was going to be a harsh winter may have been on consumers' minds."

Crude prices have tapered a bit from their highs earlier this fall, though fears of a possible heating oil shortage in the Northeast and record-high natural gas prices continue to worry consumers.

The most notable decline this month came in consumer expectations, a component of the overall index that assesses how consumers view the short-term future. That outlook dropped from a revised 101.2 in November to 95.8 in December.

In particular, the figures show 10.2 percent of consumers expect business conditions to worsen, compared with 8.3 percent last month. In something of a contradiction, however, 16.7 percent of consumers expect conditions to improve, up from 14.7 percent.

About 15.9 percent of consumers expect fewer jobs to become available, up from 13.6 percent in November, the Conference Board. The report also showed a slight increase in the percentage of consumers planning to buy major appliances and automobiles in the next six months, but a slight drop in plans to buy new homes.

Many hope the index and other economic data will persuade the Federal Reserve to cut interest rates sooner, rather than later. The Fed last week shifted its focus away from inflation to watching for signs of economic weakness; market watchers expect a rate cut sometime in January.