US stocks close at session lows

Nine out of 10 sectors traded lower led by drop in telecom stocks

U.S. stocks closed at session lows on Tuesday, 16 August 2016 a day after notching record highs, as investors weighed hawkish comments by Federal Reserve officials against sharp gains for oil futures, a weakening dollar and fresh consumer-price data that showed U.S. inflation remains tepid.

The Dow Jones Industrial Average closed down 84.03 points, or 0.5%, at 18,552.02. The S&P 500 index fell 12 points, or 0.6%, to close at 2,178.15. The Nasdaq Composite Index finished down 34.90 points, or 0.7%, at 5,227.11, after setting record closing levels for three sessions in a row.

Dow components were pressured by declines in both Johnson & Johnson and Verizon Communications. Nine out of 10 sectors traded lower, led by drop in telecom stocks.

The S&P 500, Dow industrials, and Nasdaq Composite all set all-time closing highs on Monday, marking the second time in three sessions that all three indexes notched records on the same day.

William Dudley, president of the New York Federal Reserve Bank, on Tuesday said the time for another interest-rate increase is approaching and a rate increase as soon as September is a possibility, adding to the selling pressures on U.S. equities.

Also weighing on stocks was a report showing the U. S.consumer-price index was unchanged in July. Separately, the Commerce Department said that housing starts rose to their second-highest rate since the recession on multifamily-home rebound. And industrial production in July saw the biggest one-month gain in 20 months, suggesting that the factory sector could be on the mend.

Overnight, San Francisco Fed President John Williams said the central bank should consider aiming for higher inflation than the current 2% target. The current target is not well suited for the new low-interest-rate era because there is simply not enough room for central banks to cut interest rates in response to an economic downturn.

Among individual companies, Home Depot shares slid 0.4% after the do-it-yourself retailer reported same-store sales rose 5.4% in the second quarter.

As the dollar pulled lower, gold rose to its highest level in two weeks, settling up 0.7% at $1,356.90 an ounce.

Data also showed inflation in the U.K. rose a forecast-beating 0.6% in July, on fallout from the Brexit vote, which made imported goods pricier in that country.

The U.S. Dollar Index ended off its worst level as the euro and yen pared gains against the greenback. The single currency advanced 0.9% against the buck while the dollar/yen pair ended lower by 1.0%.

Treasuries ended the day near their lows. The yield on the benchmark 10-yr note settled higher by two basis points at 1.57% while the yield on the 2-yr note edged up two basis points to 0.75%.

Today's participation was below the recent average as fewer than 730 million shares changed hands at the NYSE floor.

Tomorrow's economic data will be limited to the 7:00 a.m. ET release of the MBA Mortgage Index and the 2:00 p.m. ET release of the FOMC Minutes from the July meeting. Tucked in between the Department of Energy will release its closely-followed inventory report at 10:30 a.m. ET.

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