Investing.com – Wall Street pulled back from record highs reached in the prior session as remarks from a Federal Reserve (Fed) official trumped weak inflation data, causing markets to reconsider Tuesday the possibility of a return to policy tightening by the end of the year.
At 15:27GMT, or 11:47AM ET, the Dow 30 fell 36 points, or 0.20%, the S&P 500 lost 6 points, or 0.28%, while the tech-heavy Nasdaq Composite traded down 21 points or 0.40%.
New York Fed president William Dudley warned markets that rate hike in September was possible, forcing financial markets to ratchet up the odds for a return to policy normalization this year.
Dudley, a voting member on policy decisions, said in an interview with Fox Business Network that the Fed was “getting closer to that point in time when it will be appropriate to actually raise short-term rates again.”
Fed fund futures doubled the odds on a September hike to 18% on Tuesday, compared to just 9% the prior day, according to CME Group’s FedWatch tool.
The probability of a hike in December jumped to 55.1%, compared to just 41.9% on Monday.
The dollar also benefited from the remarks, pulling back from a seven-week low against major rivals of 94.38 hit on Thursday, although the greenback was still down across the board.
Dudley’s comments were given more weight than the July consumer price inflation (CPI) also released on Tuesday.
Both headline and core inflation eased when compared to the month before, missing consensus and reducing pressure on the Fed to return to policy tightening.
In other data, industrial production performed better-than-expected in July, bolstering optimism over the economy at the start of the third quarter.
Additionally, the number of housing starts issued in the U.S. rose more than forecast in July, but building permits fell unexpectedly, painting a mixed picture of the U.S. housing sector.
In company news, Home Depot (NYSE:HD) bucked the general trend on the Dow, leading the index higher after reporting better than expected earnings.
Shares of Apple (NASDAQ:AAPL) were the second-biggest advancer with gains attributed to the fact that Warren Buffett’s Berkshire Hathaway (NYSE:BRKa) had increased its shares in the iPhone maker by 55%.
In big moves on earnings, Dick’s Sporting Goods Inc (NYSE:DKS) jumped 8% on a solid report, while the retailer also produced a better-than-expected guidance.
On the downside, Coty Inc (NYSE:COTY) tumbled nearly 7% after swinging to a loss, though both adjusted earnings per share and revenue beat consensus estimates.
Cree Inc (NASDAQ:CREE) or Urban Outfitters (NASDAQ:URBN) were among firms set to publish after the market close.
Elsewhere, oil was continuing its recent rally for a fourth day on Tuesday amid indications major oil producers are reconsidering a collective production freeze in a bid to boost the market.
Meanwhile, market participants turned to the industry group American Petroleum Institute’s weekly crude inventory report out later on Tuesday.
U.S. crude futures traded up 1.49% to $46.42 by 15:29GMT, or 11:29AM ET, while Brent oil gained 1.32% to $48.99.