Wall Street stocks fell on Tuesday as fears of a sooner-than-expected US rate hike loomed and overpowered potential gains of the highest oil prices since early October.
U.S. consumer prices recorded their biggest increase in more than three years in April, pointing to a steady inflation build-up. Traders see the probability of a rate hike after the Fed's November 2 meeting at 49%, up from 42% on Monday, according to the CME FedWatch tool.
The bellwhether S&P 500 index closed down 0.9% at 2,047, while the Dow Jones shed nearly 200 points to 17,529 and the Nasdaq posted its worst day in a month.
Among small caps it was even worse. The S&P Midcap 400 closed down 1.1% at 1,438, the S&P Smallcap 600 lost 1.7% to 672, while the wider small-cap Russell 2000 shed 1.7% to 1,097.
Almost lost in the traffic of downbeat bourses, US WTI crude oil futures settled up 1.2% at $48.31 a barrel.
Retail sector stocks, among others, had a rough ride on Tuesday, although some at least saw the end of the tunnel within sight. The Q1 earnings season is coming to an end, with 89% of companies reporting in the US, where 74% of S&P500 companies beat EPS estimates, calculated analysts at JP Morgan.
The actual EPS growth ran at minus 8% overall and at minus 2% ex-Energy and 53% of companies beat sales estimates, with sales up 1% ex-Energy.
US stocks dropped at midsession on Tuesday after a spike in consumer prices led to renewed speculation the Federal Reserve may act sooner to hike rates, while specialist retailers reported glum numbers.
U.S. consumer prices recorded their biggest increase in more than three years in April, pointing to a steady inflation build-up. Traders see the probability of a rate hike after the Fed's November 2 meeting at 49%, up from 42% on Monday, according to the CME FedWatch tool. The meeting will come just days before the US presidential election.
Although buttressed by firmer oil prices, with the WTI up 1.22% at $48.30 - its highest level since early October - first the bellwether S&P 500 and later the smaller cap tickers succumbed to downside.
The S&P 500 was down 0.47% at 2,056, while the S&P Midcap 400 was down 0.33% at 1,450 and lead by Officer Depot (NASDAQ:ODP) down 5.4% at $3.30.
The S&P Smallcap 600 was down 0.5% at 680 and lead by Francesca's Holdings (NASDAQ:FRAN), down 30% at $10.42 after the company's Chairman and CEO Michael Barnes was announced to be leaving the company for personal reasons, effective immediately.
Francesca's, which operates a chain of apparel and accessories stores, reported preliminary earnings of 17 cents per share for the fiscal 2016 first quarter ended April 30. Analysts were expecting earnings of 20 cents per share.
It is expected to be a rocky week for specialist retailers as many report earnings and face heavy shorting of their stocks in advance of those numbers. Read more.
Wall Street shares were lower at the open as the upbeat mood faded and traders mulled inflation data.
After futures had pointed to a higher start, the benchmark Dow Jones is down over 65 at 17,645, the S&P500 lost 6.66 to 2,060 and the tech heavy Nasdaq shed over 15 points to 4,759.
The oil price added 0.57% to US$47.99, having earlier been over 2% higher.
Official stats showed a rose in US inflation - the fastest increase in April in more than three years. It all tapped into the view that the Fed may well raise interest rates later this year.
On Nasdaq, Francesa Holdings (NASDAQ:FRAN) tanked over 29% as it said Michael Barnes, chairman, CEO and president, has resigned for personal reasons effective immediately.
The retailer, which has over 600 stores, also estimated fiscal first quarter EPS at $0.17, below the present Street view of $0.19 per share.