Consumer confidence fell to its lowest level since February in September, underscoring lingering worries about the stremgth of the economic recovery, while home prices dipped in July.
The Conference Board's index of consumer attitudes fell to 48.5 in September from a revised 53.2 in August, pressured by a weak labor market and business conditions.
The report also showed inflation expectations eased slightly. Consumers' one year inflation expectations edged down to 4.9 percent from 5.0 percent the previous month.
With unemployment at a 26 year high, confidence among consumers remain weak, this decline in sentiment will give the Fed a stronger reason to increase stimulus in November, said Kathy Lien, director of currency research at GFT in New York.
The Federal Reserve said last week it was prepared to put more money into the economy, if needed, to stimulate the recovery and avoid deflation.
In the home prices report, the S&P/Case Shiller composite index of 20 metropolitan areas declined 0.1 percent in July from June on a seasonally adjusted basis, as expected in a Reuters poll.
Stocks .SPX extended declines following the confidence data, while 30-year Treasury bond prices rose more than a point. The dollar fell against major currencies.
Last Friday the Thomson Reuters/University of Michigan's preliminary September reading on consumer sentiment last Friday was worse than expected and at the weakest level in more than a year.
But in overseas data on Tuesday, consumer sentiment in Germany and Italy improved and French consumer spending rose during the summer.
BUSINESS OUTLOOK WEAKENS TOO
Separately, a U.S. Business Roundtable survey found the number of CEOs who expect their companies' sales and U.S. headcount to rise over the six months declined in September.
The group's CEO Economic Outlook Index declined to 86 from 94.6 in the third quarter, but remained well above the 50 mark, which separates forecasts of growth from expectations of decline.
President Barack Obama, who is traveling across the United States this week to try to drum up voter enthusiasm ahead of the November U.S. congressional elections, signed a $30 billion small business lending bill into law on Monday.
Analysts have said the mid-term elections could result in the Republicans wresting control of Congress from the Democratic Party.
HOME PRICES UP VERSUS YEAR AGO
The July dip in home prices in the S&P/Case Shiller index followed a 0.2 percent June rise, which was revised down from a 0.3 percent increase.
S&P, which publishes the indexes, also said home prices in the 20 cities index rose 3.2 percent from July 2009, a slower annual pace than the 4.2 percent increased in June.
Data last week showed new home building rose in August and sales of previously owned houses crawled off a 13-year low.
Analysts have been watching for signs of stability in the housing market after declines seen with the end of a tax credit for home buyers in April.
People are still waiting to get a set of numbers that has absolutely none of the government incentive in it for home buyers. From what I was able to gather, we are a couple of months away from that, said Peter Jankovskis, co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois.