Updated from 4:15 p.m. EDT

Stocks closed lower for a second session Tuesday as economic data continued to show inflation pressure, adding to worries that the

Federal Reserve

will keep hiking rates.

The

Dow Jones Industrial Average

lost 59.95 points, or 0.54%, to 11,125.73, and the

S&P 500

fell 5.74 points, or 0.45%, to 1270.92. The

Nasdaq Composite

dropped 29.48 points, or 1.41%, to 2061.99 as semiconductor and computer hardware stocks sank. All three indices finished above their worst levels of the day.

"It's a little frustrating to see one-way action so far this week," said Dave Briggs, head of equity trading with Federated. "The market is vulnerable. While investors are sitting on the sidelines, nobody is defending any stocks. Everyone is waiting around for the next few data points, including the jobs number on Friday and the Fed meeting next week."

Whole Foods Market

( WFMI) pressured the Nasdaq after reporting fiscal third-quarter earnings of $53.9 million, or 37 cents a share, up from a year ago and ahead of the Thomson First Call average estimate. However, the company posted revenue of $1.34 billion, falling below estimates. Whole Foods dropped $6.76, or 11.8%, to $50.75.

The Dow, meanwhile, was dragged lower by declines of 1.9% or more in components

General Motors

(GM) - Get Report

,

Intel

(INTC) - Get Report

and

Alcoa

(AA) - Get Report

.

About 1.66 billion shares changed hands on the

New York Stock Exchange

, with decliners outpacing advancers by a 5-to-3 ratio. Volume on the Nasdaq was 1.69 billion shares as losers beat winners 7 to 3.

The Commerce Department's report on personal income showed a rise of 0.6% in June, while spending was up 0.4%. Both numbers were in line with expectations. However, the core personal consumption expenditure price index, which excludes food and energy, rose 0.2% in June. The index has risen 2.4% over the past year, matching an 11-year high.

Following the release of the deflator, the odds of a 25-basis-point rate hike at the Fed's meeting next week increased to 42% from about 30% at Monday's close. The 10-year Treasury bond was unchanged in price to yield 4.98%, and the dollar rose against the yen and euro.

To view Gregg Greenberg's video take on today's market, click here

.

"The short-term problem of inflation continues," said Peter Cardillo, chief market strategist with S.W. Bach & Co. "The core year-over-year rate is above the Federal Reserve's so-called comfort level. Earnings will take a back seat to the economic data this week, as we're not sure what the Fed will do at the Aug. 8 meeting."

Elsewhere, the Institute for Supply Management's manufacturing index unexpectedly rose to 54.7 in July from 53.8 in June. Economists expected the index to dip to 53.5. In addition, the Commerce Department said construction spending rose 0.3% in June after a 0.4% decline the previous month. Spending was expected to rise 0.1% for the month.

On Monday, stocks closed out a volatile month with losses, as the Dow lost 34 points to 11,186, the S&P 500 slipped 2 points to 1277 and the Nasdaq fell 3 points to 2091. For July, the Dow gained 0.3%, the S&P 500 rose 0.5%, and the Nasdaq tumbled 3.7%

"In effect, the bears have drawn a line in the sand at Friday's high and now dare the bulls to cross it," said Ken Tower, chief market strategist with CyberTrader. "Yesterday's action warns that the uptrend is at risk."

Crude oil futures rose as Israel expanded a ground offensive against Hezbollah, Tropical Storm Chris gathered strength in the Caribbean and a heat wave crawled across the eastern U.S. with temperatures of 100 degrees of more. In Nymex floor trading, September crude gained 51 cents to close at $74.91 a barrel. Gold rose $12 to $652.40 an ounce.

Among earnings,

Verizon

(VZ) - Get Report

said second-quarter net fell 24% from a year ago due to one-time items. Excluding those, Verizon earned 64 cents a share, beating estimates by 2 cents. Revenue rose 26% to $22.7 billion, just shy of estimates. Verizon gave back 55 cents, or 1.6%, to close at $33.27.

Sirius Satellite Radio

(SIRI) - Get Report

said second-quarter revenue roughly tripled from a year ago to $150 million, about $3 million better than expected. The satellite radio outfit reported a slightly wider-than-expected loss. It also bumped up full-year revenue and subscriber guidance. However, Sirius ended down 12 cents, or 2.9%, to $4.08.

Qwest Communications

(Q)

swung to a second-quarter profit of $117 million, or 6 cents a share, compared with a loss of $164 million, or 9 cents a share, a year ago. Revenue was flat at about $3.47 billion. The Thomson First Call consensus was for EPS of 5 cents on revenue of $3.49 billion. Qwest climbed 61 cents, or 7.8%, to $8.40.

Eastman Kodak

( EK) lost $282 million, or 98 cents a share, in the second quarter, widening from a loss of $155 million, or 54 cents a share, last year. Excluding one-time items, Kodak lost $54 million, or 19 cents a share. Analysts surveyed by Thomson Financial were looking for a 22-cent profit. Kodak tumbled $3.05, or 13.7%, to $19.20.

Auto-parts maker

Visteon

(VC) - Get Report

reported second-quarter earnings of $50 million, or 39 cents a share, reversing a loss of $1.2 billion, or $9.85 a share, in the same quarter last year. Sales fell to $3 billion from $5 billion a year ago. Analysts anticipated a loss of 5 cents a share on sales of $3.01 billion, according to Thomson First Call. After opening higher, the stock fell 10 cents, or 1.4%, to close at $7.04.

Coach

(COH)

saw fiscal fourth-quarter earnings rise to $117.6 million, or 31 cents a share, from $89.9 million, or 23 cents, a year earlier. Sales jumped to $514.4 million from $418.7 million a year ago. The Thomson First Call average estimate was for earnings of 29 cents a share on sales of $508.2 million. Coach also offered full-year guidance above analysts' forecasts. Shares reversed early losses and finished up 79 cents, or 2.8%, to $29.50.

IAC/InterActiveCorp

(IACI)

said second-quarter net income plummeted 91% to $53.8 million, or 17 cents a share, from a gain-swollen year-ago period. Revenue surged 18% to $1.6 billion from a year earlier. Analysts were looking for earnings of 29 cents a share on revenue of $1.59 billion, according to Thomson First Call. IAC was higher by $1.40, or 5.9%, to $25.11.

Automakers posted their July sales results, with

Ford

(F) - Get Report

reporting a 34.2% drop in sales to 241,339 vehicles, down from 366,548 a year ago. Ford lost 9 cents, or 1.4%, to $6.58.

GM said July auto sales dropped 22.2% from last year to 410,332 vehicles as truck sales tumbled 31.2%. Rival

DaimlerChrysler

( DCX) said sales fell to 171,940 vehicles, down from 260,937 last year. Shares of GM were off 93 cents, or 2.9%, to close at $31.30. DaimlerChrysler lost 61 cents, or 1.2%, to $51.04.

Overseas markets were lower, with London's FTSE 100 falling 0.8% to 5878 and Germany's Xetra DAX losing 1.5% to 5597. In Asia, Japan's Nikkei fell 0.1% overnight to 15,441, and Hong Kong's Hang Seng slipped 0.4% to 16,911.

On Wednesday, earnings reports are expected from

Procter & Gamble

(PG) - Get Report

,

Starbucks

(SBUX) - Get Report

,

Time Warner

(TWX)

and

Sunoco

(SUN) - Get Report

, among others.