Wall Street stocks retreated on Tuesday morning as investor confidence gave way to pessimism in the wake of data showing plummeting consumer confidence and further weakness in the housing sector.

Statistics from the Conference Board's suggested consumer confidence in the US fell to the lowest in a generation.

The New York-based research group said its index fell to 64.5, a five-year low, from a revised 76.4 in February, on Tuesday.

Analysts at ING were expecting consumer confidence to continue on its recent downward trend, as Americans feel the effects of "rising energy and food costs, which their wages are not keeping pace with, while they are also seeing the value of their assets falling in the wake of equity and house price declines."

They predicted the index would drop to 72 in March, significantly underestimating the eventual number.

Separate data released on Tuesday morning also painted a bleak picture of the housing sector, as prices for existing single family homes in 20 metropolitan areas around the US dropped in January by the most on record.

The S&P/Case-Shiller home price index dropped 10.7 percent from January 2007, following on from a 9.5 per cent decrease in December. The index has now fallen for 13 months in a row.

Analysts had been forecasting a slightly less dramatic fall of 10.5 per cent.

In total 16 of the 20 reporting metropolitan areas posted record low annual declines, of which 10 are in double-digits.

"Unfortunately it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007," said David M. Blitzer, Chairman of the Index Committee at Standard & Poor's. "Home prices continue to fall, decelerate and reach record lows across the nation."

Las Vegas and Miami were the weakest markets in January, reporting annual declines of 19.3 per cent, followed by Phoenix at 18.2 per cent.

The new data rather dampen optimism triggered on Monday by numbers showing a surprise increase in existing home sales in February.

That news and a raised offer from JPMorgan for Bear Stearns (NYSE: BSC - News) had pushed US stocks to their highest close in a month on Monday - a rally that carried over into pre-market trade before easing back in early trade.

Claire Collingwood, a dealer at CMC Markets, said: "Yesterday [Monday] saw strong gains on Wall Street. . . A re-evaluation of the Bear Stearns deal price by JP Morgan gave investors added belief that the credit crunch was coming to an end."

Bear Stearns shares fell back 1 per cent to $11.14, moving closer to the revised $10-share bid price, and JPMorgan dropped 0.7 per cent to $46.22.

The benchmark S&P 500 index fell 0.4 per cent to 1,345.10 points in early trade, while the Nasdaq composite index was down 0.2 per cent to 2,322.14 points.

The Dow Jones industrial average was down 0.5 per cent at 12,480.50

In other mortgage-related news, shares in Thornburg Mortgage (NYSE: TMA - News) , the embattled "jumbo" mortgage specialist, surged after the company said it will raise up to $1.35bn of debt as part of ongoing efforts to stave off bankruptcy.

The shares, which have lost over 90 per cent of their value in the last year, jumped 37 per cent to $1.74.

The weaker-than-expected home prices will stoke concerns that the Conference Board's consumer confidence statistics, due at 10 am could also be worse than anticipated.

Analysts at ING are expecting consumer confidence to continue on its recent downward trend as Americans feel the effects of "rising energy and food costs, which their wages are not keeping pace with, while they are also seeing the value of their assets falling in the wake of equity and house price declines."

They predict the index will drop from 75 in February to 72 in March, although consensus expectations are for a smaller but still significant fall to 73.5.

Still, stock markets received a small boost from Yahoo, the internet company, which rose 1.9 per cent to $28.04 after Citigroup analysts suggested buying the stock on the basis that Microsoft may increase its offer for the company.

Qualcomm (NASDAQ: QCOM - News) , the maker of chips for mobile phones, also made ground in early trade after Merrill Lynch analysts upgraded the stock from "neutral" to "buy", citing a more positive outlook for handset sales this year.

Qualcomm shares rose 0.9 per cent to $40.24.

A bounce in commodity prices created some momentum for stocks in related companies

Freeport-McMoRan Copper & Gold and Newmont Mining (NYSE: NEM - News) climbed after gold rallied and copper advanced for a second day.

Freeport-McMoRan climbed 4.5 per cent to $92.77, while Newmont rose 3.5 per cent to $47.04. Gold miners were heavily sold last week as gold prices tumbled from record highs.