NEW YORK, March 29: US stock markets closed lower on Friday as a government survey showed American consumers pulled in their belts a few notches last month amid lingering economic uncertainty.

Stocks failed to hold opening gains in the wake of the release of a government report which showed a meager 0.1 per cent rise in consumer spending during February.

A profit warning from the giant retailer JC Penney also depressed investor optimism.

The Dow Jones Industrial Average ended down 86.06 points (0.70 per cent) at 12,216.40.

The Nasdaq composite lost 19.65 points (0.86 per cent) to 2,261.18 and the broad market Standard & Poor’s 500 index tumbled 10.54 points (0.80 per cent) to close at 1,315.22.

The downbeat news on consumer spending unsettled stock market investors because consumer spending accounts for the lion’s share of economic growth. It also renewed fears that the economy could slip into a recession, especially as growth slowed dramatically to a lackluster 0.6 per cent in the fourth quarter.

Consumer confidence is at a multiyear low, said JC Penney chairman and chief executive Myron Ullman.

The national retailer cautioned that its first quarter earnings are now likely to be around 50 cents per share and not between 75 and 80 cents as it had previously forecast.

JC Penney’s shares slumped 7.5 per cent to $37.48.

Some analysts, however, said there was a silver lining in the monthly government survey as it also showed inflation pressures were tame last month.

Economy watchers zeroed in on an inflation indicator buried in the report which showed that consumer prices, excluding volatile food and energy costs, rose a lower than expected 2.0 per cent in the twelve months to February.

The Fed is getting more concerned about inflation risks the lower it pushes interest rates, but this reading indicates that the Fed has room to cut further, said Nigel Gault, an economist at Global Insight.

The central bank has slashed rates since September and pumped hundreds of billions into the stressed US banking system in a bid to shore up economic growth and to offset a broadening credit crunch triggered by a lengthy housing market slump.—AFP