U.S. stocks closed lower Tuesday, amid gains in oil prices, after renewed investor concerns about a Fed moving sooner rather than later. (Tweet This)
"I think the prospects of a more active Fed has the market a bit on edge today, especially after the big gains yesterday," said Michael Baele, managing director, The Private Client Reserve, U.S. Bank.
"I think earnings basically validated the current valuations. The next thing that could help the market move forward is (if this) rebound in commodities has some staying power," he said.
U.S. crude oil futures settled up 59 cents, or 1.2 percent, at $48.31 a barrel, its highest since October. Brent settled above $49 a barrel. Oil gained amid near-term supply outages, as a wildfire in Canada prompted evacuation of about 4,000 people from work camps outside the Fort McMurray oil hub, Reuters said.
Despite the gains in oil, selling in stocks accelerated in afternoon trade. The rate-sensitive 2-year Treasury yield rose to its highest in more than two weeks as bond traders looked ahead to Wednesday's release of the Fed meeting minutes, which many feared could be more hawkish than the statement.
That fear was echoed in comments from San Francisco Fed President John Williams and Atlanta Fed President Dennis Lockhart who said in a Reuters report the Fed could still raise rates two or three times this year.
Neither are voting members of the Fed, and markets are most focused on comments from Fed Chair Janet Yellen. She is scheduled to speak June 6 at a World Affairs Council of Philadelphia luncheon, according to a late Monday announcement.
Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, said the timing of the speech ahead of the Fed's June meeting means the comments are "going to preempt the Fed minutes."
The Federal Open Market Committee is scheduled to release its April meeting minutes at 2 p.m. ET Wednesday.
"Could be a little investor anxiety at the moment," said John Caruso, senior market strategist at RJO Futures. He expects the general tone of the Fed to remain dovish.
The S&P 500 clung to weekly gains of 0.03 percent and year-to-date gains of 0.16 percent, with energy the only gainer and consumer staples and utilities lagging with declines of more than 1.5 percent.
"If people are worried about the Fed, the market's up this week so they can't be too worried," Peter Boockvar, chief market analyst at The Lindsey Group, said as the afternoon selling began.
With Tuesday's declines into the close, the major averages were flat for the week so far, after rising 1 percent Monday when Apple gained 3.7 percent for its best day since March 1.
"Yesterday was a one-day wonder. It was short-covering in Apple," said Art Cashin, director of floor operations at the New York Stock Exchange for UBS.
The Dow Jones industrial average closed 180 points lower Tuesday after falling 240 points. Home Depot fell nearly 2.5 percent to contribute the most to declines in the index as nearly all constituents fell. Early Tuesday, the home improvement retailer posted quarterly earnings and revenue that topped expectations and also raised its full-year guidance. The stock is up more than 16 percent over the last 12 months.
"A lot of money gets pushed hard into one sector and it helps the overall market," said Adam Sarhan, CEO of Sarhan Capital.
"We're seeing a lot of ... sideways, trendless activity as the market desperately waits for the next big catalyst," he said.
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In U.S. economic news, industrial production rose 0.7 percent in April. Capacity utilization was 75.4 percent.
The Consumer Price Index rose 0.4 percent in April, the Labor Department said. Ex-food and energy, the index rose 0.2 percent last month, or 2.1 percent over the last 12 months. That compares with a 2.2 percent rise for the 12 months ending March.
Housing starts rose 6.6 percent in April to a seasonally adjusted annual pace of 1.17 million units.
Treasury yields held mostly higher, with the 10-year yield around 1.76 percent and the briefly hitting 0.827 percent, its highest since April 28.
The U.S .dollar index was a touch lower, with the euro around $1.132 and the yen near 109.1 yen against the greenback.
"I don't think CPI's hot enough to make a difference (about a Fed rate hike). I think you've got an unchanged rate hike environment. You've got a bit of sell-off in European markets," said Art Hogan, chief market strategist at Wunderlich Securities.
European stocks were mostly lower, with the German DAX off more than half a percent. Asian stocks closed mostly higher, with the Nikkei 225 up 1.1 percent and the Shanghai composite off 0.25 percent.
TJX Cos, the owner of T.J. Maxx and Marshalls, reported a 9.9 percent rise in quarterly sales, while comparable sales rose 7 percent. Net income rose to $508.3 million, or 76 cents per share, in the first quarter ended April 30 from $474.6 million, or 69 cents per share, a year earlier. Shares closed half a percent higher and are up more than 14 percent over the last 12 months.
The Dow Jones industrial average closed down 180.73 points, or 1.02 percent, at 17,529.98, with Home Depot leading decliners and Caterpillar and DuPont the only gainers. JPMorgan Chase closed unchanged.
The closed down 19.45 points, or 0.94 percent, at 2,047.21, with consumer staples leading nine sectors lower and energy the only gainer.
The Nasdaq composite closed down 59.73 points, or 1.25 percent, at 4,715.73.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose to trade near 15.6.
About two stocks declined for every advancer on the New York Stock Exchange, with an exchange volume of 1.0 billion and a composite volume of 4.0 billion in the close.
Gold futures for June delivery settled up $2.70 at $1,276.90 an ounce.
—Reuters contributed to this report.
On tap this week:
Earnings: Target, Lowe's, SAB Miller, Cisco, Hormel, Staples, Booz Allen, L Brands, Salesforce.com, Analog Devices, Burberry, Take Two Interactive
2 p.m. FOMC minutes
Earnings: Wal-Mart, Gap, Applied Materials, Dick's Sporting Goods, Autodesk, Advanced Auto Parts, Ross Stores, Shoe Carnival, Mentor Graphics, Brocade
8:30 a.m. Jobless claims; Philadelphia Fed survey
10:30 a.m. New York Fed President William Dudley press briefing
Earnings: Campbell Soup, Deere, Foot Locker, The Buckle
10 a.m. Existing home sales
*Planner subject to change.
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