Stock losses accelerated by mid-afternoon Tuesday after recovering consumer inflation and Federal Reserve comments prompted worries over a rate hike sooner than expected.
The S&P 500 was down 1.2%, the Dow Jones Industrial Average fell 1.3%, and the Nasdaq slipped 1.4%.
The June Fed meeting is a live one for a rate hike, Atlanta Fed President Dennis Lockhart and San Francisco Fed President John Williams said in comments at an event held by Politico. The non-voting members of the Federal Open Market Committee suggested markets were underestimating the Fed's hike plans.
June "certainly could be a meeting at which action could be taken," Lockhart said.
Traders are currently pricing in a 19% chance of a June rate hike, according to CME Group federal funds futures. A July rate hike has a 36% chance. The FOMC will meet on June 14-15.
Consumer prices increased at their fastest pace in more than three years in April as fuel prices continued to grow. Prices rose 0.4% in April, driven by a 8.1% surge in gas prices. Core prices, excluding food and energy, climbed 0.2%, as analysts had expected. However. consumer prices rose just 1.1% over the past 12 months, far from the Fed's 2% target rate.
"A larger-than-expected rise in consumer prices at the start of the second quarter is a welcome data point for policy makers chomping at the bit to justify a second rate hike near-term," said Lindsey Piegza, chief economist at Stifel. "With a weak start out of the gate and a recent disappointing employment report, there was little as of late for the Committee to hang their hat on in terms of underlying improvement or additional gains in inflation."
Crude oil remained near seven-month highs, though were well off session highs. Crude had topped $48 a barrel earlier as production outages in Nigeria and decreased production from a wildfire-stricken Alberta region relieved a supply glut. Crude hit highs on Monday after Goldman Sachs analysts turned bullish on the oil market, predicting a $50 level in the back half of the year.
West Texas Intermediate crude oil was trading 0.5% higher at $47.95 a barrel on Tuesday.
"The outages in Canada and Nigeria alone are probably enough to leave the global oil market undersupplied at present," Commerzbank analysts wrote in a note. "It is currently impossible to predict how long this situation will continue. Oil prices therefore remain well-supported for the time being."
Industrial production increased 0.7%, its biggest gain since November 2014 and the first increase in three months. Economists had expected industrial activity to expand 0.3% in April. Utility production was one of the biggest drivers, increasing by 5.8%, its most since 2007. Electricity production saw its biggest increase in more than nine years.
"With the strong gains in utility production likely to be unsustainable and the rebound in the manufacturing sector looking vulnerable, the outlook for the industrial sector appears to be quite weak -- particularly given signs of some softening in underlying domestic momentum," Millan Mulraine, deputy chief U.S. macro strategist at TD Securities, wrote in a note.
Housing starts rose 6.6% in April to a seasonally adjusted annual rate of 1.17 million, recovering the bulk of March's decline, the Commerce Department said Tuesday. Homebuilder permits increased 3.6% to 1.12 million.
Apple(AAPL) - Get Report reclaimed its crown as the world's largest company on Monday after a Warren Buffett-inspired rally pulled the iPhone maker back from last week's multi-year lows. Buffett's Berkshire Hathaway(BRK.A) - Get Report disclosed a stake in Apple worth nearly $900 million on Monday morning.
David Einhorn's hedge fund Greenlight Capital also jumped in on Apple, increasing its holdings in the tech giant and Yahoo! (YHOO) during the first quarter. Greenlight purchased 1.9 million Apple shares, boosting its position to 8.2 million.
Home Depot(HD) - Get Report was lower despite topping first-quarter forecasts and raising its full-year guidance. The DIY retail chain earned an adjusted $1.44 a share in its recent quarter, 8 cents above estimates. The retailer benefited from a robust housing market and customer appetite for home-improvement projects even as overall retail trends suffered in the start to the year.
Lending Club(LC) - Get Report tumbled 14% after disclosing it had received a federal subpoena only days after the forced resignation of CEO Renaud Laplanche over the failure to report improper loan sales. The peer-to-peer lender's subpoena concerned "non-conforming sales" likely tied to the $22 million in loans sold in March and April to an investor which didn't fit criteria.
Pandora (P) jumped 5% after activist investor Corvex Management urged a sale. The investment firm, which owns 8.3% of Pandora, said the company has been unable to "translate its great product into a great business with an attractive public market valuation."