Wall Street slips as solid data raises prospect of rate hike

Wall Street opened lower on Tuesday as data showed US consumer prices recorded their biggest increase in more than three years in April, raising the chances of an interest rate hike this year.

The Labor Department said the Consumer Price Index increased 0.4% last month, the largest gain since February 2013, after rising 0.1% in March. That took the year-on-year increase in the CPI to 1.1% from 0.9% in March.

"We have the CPI which came in more than expected and that's going to put us again on Fed watch," said Peter Cardillo, chief market economist at First Standard Financial in New York.

"We also had the housing starts come in stronger than expected, so that's another indication that the economy is picking up steam."

Investors are closely watching data to assess when the Fed will raise interest rates. While some Fed officials have suggested two hikes this year, traders are pricing in only one hike at the end of the year.

While the labor market has gained strength, inflation has stubbornly remained below the Fed's 2% target. The central bank's preferred inflation measure stands at 1.6%.

US housing starts rose more than expected in April as builders ramped up the construction of single and multi-family homes, supporting views that the economy was regaining momentum early in the second quarter.

At 9:38 a.m. ET (1338 GMT) the Dow Jones industrial average was down 72.87 points, or 0.41%, at 17,637.84, the S&P 500 was down 6.95 points, or 0.34%, at 2,059.71 and the Nasdaq Composite was down 14.91 points, or 0.31%, at 4,760.55.

Nine of the 10 major S&P 500 sectors were lower, with the utilities index's 0.57% fall leading the decliners.

Home Depot was down 1.32% at $133.51 even after the home improvement company raised its full-year sales growth and profit forecast. The stock was the biggest drag on the Dow and the S&P.

Off-price retailer TJX Cos Inc was up 3.2% at $77.51, after the company's quarterly sales rose about 10%.

LendingClub fell 11.2% to $3.44, a record low, after the Department of Justice launched a probe into the company.

Declining issues outnumbered advancing ones on the NYSE by 1,683 to 918. On the Nasdaq, 1,367 issues fell and 796 advanced.

The S&P 500 index showed three new 52-week highs and no new lows, while the Nasdaq recorded seven new highs and 20 new lows.