The Conference Board said the consumer confidence index fell to 38, down from a revised 61.4 in September and significantly below analysts' expectations of 52.
That's the lowest level for the index since the Conference Board began tracking consumer sentiment in 1967, and the third-steepest drop. A year ago, the index stood at 95.2.
Wall Street, which has come to expect bad news on the economy, took the report in stride. The Dow gave up some of its early gains but was still up about 2 percent in midday trading, while the broader S&P 500 index rose 1.7 percent.
Investors are expecting the Federal Reserve to cut its target interest rate Wednesday by up to one-half a percentage point to 1 percent after its two-day meeting that began Tuesday.
In addition, European and Asian financial markets were up significantly Tuesday on expectations of the cut.