NEW YORK (CNN/Money) - U.S. stocks fell Tuesday, with the Dow Jones industrials average erasing the last of its gain for the year, after weaker-than-expected consumer confidence and spending figures dealt the fragile economic recovery an apparent setback.

Losses in Home Depot, Procter & Gamble and Coca-Cola weighed on the Dow, which joins the other major indexes in being lower for 2002.

The Dow industrials fell 122.68 points, or 1.2 percent, to 9,981.58, closing below the 10,021.57-level where it began the year. The Nasdaq composite index slipped 9.32, or 0.6 percent, to 1,652.17, widening its 2002 loss to 15.3 percent The Standard & Poor's 500 index lost 9.27, or 0.9 percent, to 1,074.55 and is down 6.5 percent on the year.

A report showing that Americans' expectations about business conditions dimmed this month jolted investors already jittery with terrorism fears. Separate figures showing that consumer spending rose a weaker-than-expected 0.5 percent in April didn't help.

Tim Heekin, head of stock trading at Thomas Weisel Partners, also linked some the latest losses to an unfounded rumor the President Bush left Italy early after a six-day visit to Europe.

Still, Heekin expects stocks to rise in the months ahead as investors try to buy ahead of an eventual turn in the economy. "I still think the path of least resistance is up," he said.

Good news came from a real estate group, which said that sales of existing homes jumped 7 percent to an annual rate of 5.79 million in April, surprising economists expecting a decline.

But other economic data proved less upbeat. The Conference Board's closely watched consumer confidence survey of 5,000 households showed that while the overall index rose, its expectations component slipped from April as predictions for worsening business conditions rose.

"... The latest retreat in expectations suggest that the pace of economic growth will not accelerate in the months ahead," Lynn Franco, director of the Conference Board's consumer research center, said in a statement.

More stocks fell than rose in light volume. On the New York Stock Exchange, declining shares topped advancing ones 9-to-7 as 953 million shares traded. Nasdaq losers beat winners 10-to-7 as 1.3 billion shares changed hands.

In other markets, Treasury securities edged higher. The dollar fell against the euro and yen. Gold prices rose.

The latest decline keeps the market mired in the months-long range held since stocks rallied above their post-Sept. 11 lows late last year. Stepping back, stocks have gone nearly nowhere for three years. The Dow first closed above 10,000 in early 1999.

NYSE's most actively traded stock Tuesday, Home Depot (HD: down $1.88 to $41.54, Research, Estimates), fell more than 4 percent. UBS Warburg said the No. 1 home improvement retailer has lost too many veteran managers and is not doing enough to protect market share from rival Lowe's (LOW: down $0.11 to $47.99, Research, Estimates).

Merrill Lynch cut Intel's (INTC: down $0.31 to $28.35, Research, Estimates) cut 2002 earnings estimate to 75 cents a share from 77 cents a share. "June improvement may yet materialize, but it's not turned up yet, and defending a sequential revenue increase is getting tougher," Joe Osha, who follows Intel for Merrill Lynch, told clients.

Losses in Procter & Gamble (PG: down $2.25 to $88.01, Research, Estimates) and Coca-Cola (KO: down $1.56 to $54.64, Research, Estimates) also hurt the Dow.

John Lonski, economist at Moody's Investors Service, linked the stock market's latest losses to continued fears about international instability, domestic terrorism and misleading corporate accounting that have whacked stocks this year.

"The market is really worried about events abroad and what may go on at home," Lonski said.

Gains in hard-hit technology stocks narrowed the Nasdaq's losses. Applied Materials (JDSU: up $0.08 to $3.99, Research, Estimates), Sun Microsystems (SUNW: up $0.07 to $6.93, Research, Estimates) and JDS Uniphase (JDSU: up $0.08 to $3.99, Research, Estimates) all rose.

Nearly five months into a new year, investors looking for strong signs of a pickup in the economy have come up short. Fears of another Sept. 11-like terrorist attack have drawn money out of stocks and into bonds, gold, and real estate.

Companies are not expected to reveal many details about their June quarters, when profits are expected to have snapped a five-quarter losing streak, until next month.

Staying conservative, Richard Bernstein, chief U.S. strategist at Merrill Lynch, is telling clients to stick with dividend-paying stocks such as utilities and real estate investment trusts.

"We continue to believe that longer-term investors should focus on yield," Bernstein said.