Stocks fell across industries on Tuesday, erasing gains from a rally a day earlier, as investors sifted through economic reports for clues as to when the era of low interest rates may end.
Consumer goods companies and utilities fell the most. Kraft Heinz fell 4% and Consolidated Edison dropped 2%. Nine of the 10 sectors of the Standard and Poor's 500 index ended lower. Energy stocks rose as the price of crude oil rose to a seven-month high.
The Dow Jones industrial average lost 180.73 points, or 1%, to 17,529.98. The S&P 500 index gave up 19.45 points, or 0.9%, to 2,047.21. The Nasdaq composite pulled back 59.73 points, or 1.3%, to 4,715.73.
Diane Jaffee, a senior portfolio manager at TCW Group, said investors are worried that a pick-up in inflation suggests the Federal Reserve might raise interest rates soon, threatening the still-sluggish economy. The Fed next meets on rates in June.
"The spectre of rising rates in June may be making investors queasy," said Jaffee. The economy is at a "tipping point."
The Labour Department reported Tuesday that the cost of living in April climbed by the most in more than three years. A separate report said builders are breaking ground on new homes at a faster past than last year.
Investors worry that reports like those could prompt the Fed to raise rates. That could hurt high-dividend stocks like utilities.
Adding to the jitters, Politico quoted Atlanta Fed President Dennis Lockhart saying that "action could be taken" at the Fed's June policy meeting.
Investors will get a better idea of the Fed's thinking on Wednesday when the central bank releases minutes from its last meeting in April.
Among stocks making big moves, LendingClub plunged 34 cents, or 9%, to 3.60 US dollars after the Department of Justice opened an investigation. The company forced out its founder last week after an internal review found irregularities with the way loans were sold.
The stock traded as high as 25 US dollars a share in late 2014, shortly after the company went public.
Pandora Media rose 61 cents, or 6%, to 10.59 US dollars after hedge fund Corvex Management raised its stake and began advocating for a sale of the streaming music company. Corvex said that putting the company on the block is the best answer to rising competition from Spotify and Apple.
Another report showed U.S. industrial production posted the biggest increase in April since November 2014 after dropping the previous two months. Industrial output, which includes output at factories, mines and utilities, rose 0.7% from March.
Still, production is modest. The report said that factories are operating at 75.3% of capacity, well below their long-run average.
"We've got an economy in slow-down mode, with an increase in inflation," said James Abate, chief investment officer at Centre Funds. "That is the worst possible situation."
In Europe, stocks were mixed. France's CAC 40 fell 0.3%, while Germany's Dax shed 0.6%. Britain's FTSE 100 gained 0.3%.
In Asian markets, Japan's Nikkei 225 rose 1.1% as the yen continued to weaken, a plus for Japanese exporters. Hong Kong's Hang Seng gained 1.2%.
US crude rose 59 cents to 48.31 US dollars a barrel in New York. Brent crude, used to price international oils, rose 31 cents to 49.28 US dollars a barrel in London. Wholesale gasoline rose 3 cents to 1.63 US dollars a gallon, heating oil also rose 3 cents to 1.47 US dollars a gallon and natural gas rose two cents to 2.05 US dollars per 1,000 cubic feet.
US government bond prices fell. The yield on the 10-year Treasury note rose to 1.77% from 1.75%. The dollar rose to 109.07 yen from 108.98 yen and the euro fell to 1.1317 from 1.1320 US dollars.
Precious and industrial metals futures closed mostly higher. Gold rose 2.70 US dollars to 1,276.90 US dollars an ounce and silver gained 10 cents to 17.25 US dollars an ounce. Copper was flat at 2.09 a pound US dollars.