Stocks held lower on Tuesday even as another jump in crude oil extended its rally into a fourth session.
The S&P 500 was down 0.39%, the Dow Jones Industrial Average fell 0.3%, and the Nasdaq slipped 0.47%.
Oil prices continued to move higher in day four of a rally inspired by hopes over an output freeze from major oil-producing countries. The Organization of Petroleum Exporting Countries is set to meet next month and in recent days members including Saudi Arabia and Russia have suggested a willingness to discuss a production freeze deal.
West Texas Intermediate crude oil, the U.S. benchmark, rose 1.8% to $46.58 a barrel on Tuesday.
Stock losses followed another record-making trifecta for Wall Street on Monday as stocks got a big boost from another rally in crude oil. The S&P 500 and Dow hit new records, breaking the highs seen last Thursday, while the Nasdaq added to records achieved on Friday. All-time intraday highs were also reached.
The chances of a September interest rate hike from the Federal Reserve rose on Tuesday after New York Fed President Dudley backed an increase sooner rather than later. The Fed is "edging closer towards the point in time where it will be appropriate I think to raise interest rates further," Dudley told Fox Business Network. The Fed initially raised rates in December, the first increase in nearly a decade.
The economic recovery and second-half outlook likely warrants "at least one" interest rate hike this year, Atlanta Fed President Lockhart said in a speech on Tuesday.
"Early indications of third-quarter GDP growth suggest a rebound," he said to the Rotary Club of Knoxville, Tenn. "I, as one Fed policymaker, am not prepared to rule out at least one rate hike before year's end."
A September rate hike currently has an 18% likelihood, according to CME Group fed funds futures, up from a previous 12%. A December hike has greater chances with investors pricing in a 45% likelihood.
Industrial production in July came in higher than expected in July, climbing 0.7% to 104.9. The reading was its largest increase since November 2014. Analysts had expected industrial production to rise 0.3% last month. June's reading was revised to a 0.4% increase from a previous reading of 0.6% growth.
"The overall tone of the industrial sector report was unambiguously positive, and it suggests that the recession in this sector might be over," said Millan Mulraine, deputy chief U.S. macro strategist at TD Securities. "With the dollar appearing to be drifting lower, the headwinds to this segment of the U.S. economy have begun to abate underscoring the more favorable outlook going forward."
Initial construction of homes in July rose to a seasonally adjusted rate of 1.21 million, the Commerce Department said on Tuesday. Housing starts rose 2.1% from an upwardly revised June reading. Analysts had expected a slightly weaker reading of 1.18 million. Starts climbed 5.6% from a year earlier, the second-best increase since the recession. Building permits were flat at 1.15 million.
U.S. consumer prices were unchanged in July, the Labor Department reported Tuesday. Consumer prices have risen 0.2% in the past year, the smallest increase since March 2010, as weaker energy prices drag down the headline number. Core consumer prices, which excludes volatile food and energy prices, increased 2.2% over the past 12 months.
"The CPI was unchanged in July as energy prices fell and core inflation softened," Wells Fargo analysts wrote in a note. "The weaker print in core inflation, however, stemmed from the more volatile components and is not the start of a new trend."
BHP Billiton (BHP added 1.5% despite reporting a massive annual loss, its worst ever, and slashing its dividend. The Australian miner reported a net loss of $6.39 billion, compared to profit of $1.91 billion a year earlier. Analysts had expected a net loss of $5.8 billion. BHP cut its dividend by 77%.
Home Depot (HD - Get Report) raised its full-year forecasts as a robust housing market fueled demand for DIY products. The home-improvement retailer expects full-year earnings of $6.31 a share, up from its previous target of $6.27 a share. Home Depot also improved upon quarterly profit and sales, reporting earnings of $1.97 a share, up from $1.73 a share a year earlier. Revenue rose nearly 7% to $26.47 billion.
Dick's Sporting Goods (DKS - Get Report) rose after exceeding analysts' quarterly estimates and issuing upbeat current-quarter guidance. The sports retailer earned 82 cents a share, up from 77 cents a year earlier and above consensus of 69 cents. Third-quarter earnings guidance of 39 cents to 42 cents a share, above estimates of 38 cents a share. Full-year guidance was also increased.
Hain Celestial (HAIN - Get Report) tanked after being hit with downgrades at Piper Jaffray, Wedbush and Barclays. Hain delayed the release of its full-year results and announced accounting concerns overnight.
Morgan Stanley (MS - Get Report) added more than 2% after ValueAct Capital disclosed a $1.1 billion stake, roughly worth 2% of shares outstanding. The firm said it is not calling for any changes and believes the stock is undervalued. ValueAct CEO Jeffrey Ubben said there is a "disproportionate amount of time and energy spent overanalyzing Morgan Stanley's trading and lending business and fretting about its Fed oversight."
Walmart (WMT - Get Report) was on watch after Berkshire Hathaway (BRK.A - Get Report) , headed by billionaire investor Warren Buffett, decreased its stake in the retailer to 40.2 million shares from 55.2 million. The firm also increased its stake in Apple (AAPL - Get Report) to 15.2 million from 9.8 million. The positions were current as of June 30, according to a regulatory filing.