By Caroline Valetkevitch
NEW YORK (Reuters) - U.S. stocks fell on Tuesday as Apple (O:AAPL) shares declined and as bond yields hit their highest in a month on concerns the Federal Reserve could raise interest rates sooner than some investors had expected.
All 10 S&P 500 sectors ended lower. Apple shares, which jumped as much as 4.8 percent earlier in the session after the company unveiled a smartwatch, ended down 0.4 percent at $97.99. Apple also announced two larger iPhones.
Benchmark 10-year U.S. Treasury note yields rose to 2.5 percent.
Sectors with high-dividend paying stocks including utilities were among the day's weakest. The utilities sector <.SPLRCU> and telecommunications <.SPLRCL> each fell 1.2 percent.
Improving U.S. economic conditions may force the Federal Reserve "to tighten sooner rather than later," said Doug Cote, chief market strategist with Voya Investment Management in New York.
"Rising rates are an immediate discount for financial assets, including equities," he said.
Shares of Home Depot (N:HD) fell 2.1 percent, a day after the company confirmed its payment security system had been breached.
The Dow Jones industrial average (DJI) declined 97.55 points or 0.57 percent, to 17,013.87, the S&P 500 (SPX) lost 13.1 points or 0.65 percent, to 1,988.44 and the Nasdaq Composite (IXIC) dropped 40.00 points or 0.87 percent, to 4,552.29.
About 5.7 billion shares changed hands on U.S. exchanges, above the 5.5 billion average for the last five days, according to data from BATS Global Markets.
In the options market, Apple options volume rose to a record daily volume of 2.97 million contracts traded, according to Henry Schwartz, president of options analytics firm Trade Alert. Contract volume was about three times normal and calls led puts by a ratio of 2.1:1, according to Trade Alert data.
The largest percentage gainer on the New York Stock Exchange was Pulse Electronics (N:PULS), which was rising 53.47 percent, while the largest percentage decliner was Usec (N:USU), down 18.05 percent.
Among the most active stocks on the NYSE were Brazil's Petrobras (N:PBR), down 2.83 percent to $17.83 and Pfizer (N:PFE), down 0.58 percent at $29.23.
Besides Apple, Yahoo (O:YHOO), down 2.5 percent at $40.78, and Microsoft (O:MSFT), up 0.6 percent to $46.76 were among the most actively traded on Nasdaq.
Declining issues were outnumbering advancing ones on the NYSE by 2,338 to 698, for a 3.35-to-1 ratio on the downside; on the Nasdaq, 2,046 issues were falling and 637 advancing for a 3.21-to-1 ratio favoring decliners.
The broad S&P 500 index was posting 17 new 52-week highs and five new lows; the Nasdaq Composite was recording 56 new highs and 58 new lows.
(Additional reporting by Saqib Iqbal Ahmed; Editing by Nick Zieminski, Chris Reese and Meredith Mazzilli)