Wall Street drops as caution sets in ahead of inflation data

By Sruthi Shankar

(Reuters) - Wall Street's main indexes fell for the first time in three sessions on Tuesday as caution crept in ahead of crucial data on inflation, a root cause of the recent sell-off.

A strong reading on U.S. consumer price and retail sales data on Wednesday could fan fears over rising inflation and faster interest rate hikes - the same worries that sparked the sell-off after strong jobs data on Feb. 2.

"Investors are probably positioning with a bit of a risk-off mindset going into those two (economic data reports) tomorrow," said Matt Miskin, market strategist at John Hancock Investments.

"The core CPI estimate is a modest decrease from last month. But in the event that inflation does accelerate, that could lead volatility to continue as the Goldilocks environment maybe under further pressure."

Cleveland Fed president Loretta Mester, a voting member in the central bank's rate-setting committee this year, said the recent stock market sell-off and jump in volatility will not damage the economy's overall strong prospects.

After a wildly volatile week that pushed the market into correction territory, U.S. stocks gained roughly 3 percent over Friday and Monday, their best two-day gains since June 2016.

By 11:09 a.m. ET, the Dow Jones Industrial Average was down 96.29 points, or 0.39 percent, at 24,504.98, the S&P 500 was down 8.64 points, or 0.33 percent, at 2,647.36 and the Nasdaq Composite was down 6.63 points, or 0.09 percent, at 6,975.34.

Nine of the 11 major S&P indexes were lower, led by losses in the healthcare and financial indexes.

Benchmark U.S. 10-year Treasury yields were hovering at 2.8439 percent, shy of their four-year peak of 2.9020 percent on Monday. [US/]

The CBOE Volatility Index, a widely-followed measure of short-term stock volatility, eased to near session-lows at 25.51, and well short of the 50-point mark it touched last week.

The recent pullback has wiped out all of the year's gains for the benchmark S&P 500 and the blue-chip Dow, which are now down about 0.7 percent so far in 2018.

The tech-heavy Nasdaq was still clinging to a 1.22 percent gain for the year.

Of the 70 percent of the S&P 500 companies that have reported earnings, nearly 78 percent of them topping profit expectations, according to Thomson Reuters data. That is above the 72 percent average beat-rate in the past four quarters.

Shares of Under Armour rose more than 18 percent after the sportswear maker reported quarterly revenue that beat analysts' estimates.

AmerisourceBergen jumped about 8 percent after the Wall Street Journal reported Walgreens made a takeover approach for the drug distributor. Walgreens rose marginally.

Henry Schein and Patterson Companies fell 10 percent and 9 percent, respectively, after a U.S. Federal Trade Commission complaint against the dental supply companies.

Their losses were the biggest among healthcare distributors weighing up the possible ramifications of the AmerisourceBergen deal and a report of Amazon's push into the space.

Declining issues outnumbered advancers on the NYSE by 1,527 to 1,240. On the Nasdaq, 1,352 issues fell and 1,346 advanced.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Savio D'Souza)