US stocks dropped at midsession on Tuesday after a spike in consumer prices led to renewed speculation the Federal Reserve may act sooner to hike rates, while specialist retailers reported glum numbers.
U.S. consumer prices recorded their biggest increase in more than three years in April, pointing to a steady inflation build-up. Traders see the probability of a rate hike after the Fed's November 2 meeting at 49%, up from 42% on Monday, according to the CME FedWatch tool. The meeting will come just days before the US presidential election.
Although buttressed by firmer oil prices, with the WTI up 1.22% at $48.30 - its highest level since early October - first the bellwether S&P 500 and later the smaller cap tickers succumbed to downside.
The S&P 500 was down 0.47% at 2,056, while the S&P Midcap 400 was down 0.33% at 1,450 and lead by Officer Depot (NASDAQ:ODP) down 5.4% at $3.30.
The S&P Smallcap 600 was down 0.5% at 680 and lead by Francesca's Holdings (NASDAQ:FRAN), down 30% at $10.42 after the company's Chairman and CEO Michael Barnes was announced to be leaving the company for personal reasons, effective immediately.
Francesca's, which operates a chain of apparel and accessories stores, reported preliminary earnings of 17 cents per share for the fiscal 2016 first quarter ended April 30. Analysts were expecting earnings of 20 cents per share.
It is expected to be a rocky week for specialist retailers as many report earnings and face heavy shorting of their stocks in advance of those numbers. Read more.
Open
Wall Street shares were lower at the open as the upbeat mood faded and traders mulled inflation data.
After futures had pointed to a higher start, the benchmark Dow Jones is down over 65 at 17,645, the S&P500 lost 6.66 to 2,060 and the tech heavy Nasdaq shed over 15 points to 4,759.
The oil price added 0.57% to US$47.99, having earlier been over 2% higher.
Official stats showed a rose in US inflation - the fastest increase in April in more than three years. It all tapped into the view that the Fed may well raise interest rates later this year.
Among the losers was Home Depot (NYSE:HD), the world's biggest home improvement chain, which unveiled a 9% rise in quarterly sales. Despite that shares lost 1.54% to US$133.30.
On Nasdaq, Francesa Holdings (NASDAQ:FRAN) tanked over 29% as it said Michael Barnes, chairman, CEO and president, has resigned for personal reasons effective immediately.
The retailer, which has over 600 stores, also estimated fiscal first quarter EPS at $0.17, below the present Street view of $0.19 per share.