U.S. stocks fell sharply on Tuesday after a two-session rise, with the Fed’s Bank of Philadelphia President Charles Plosser saying the central bank might have to raise rates sooner than some would expect.
“That would be a big concern, I don’t think the market believes that, we thought we were safe until 2015,” said Dave Richmond, president of Richmond Brothers, referring to comments Tuesday afternoon by Plosser in Washington.
If the economy improves as forecast, the Fed’s current taper pace may be too slow, Plosser said in prepared remarks.
Stocks started in the red as Wall Street reacted to quarterly reports from a number of retailers, and disappointing numbers from Caterpillar, which led blue-chip declines after the maker of construction and mining equipment disclosed in a regulatory filing that total retail sales of machines in the three-month rolling period that ended in April were off 13 percent.
“It’s all about earnings and Caterpillar, which is weighing heavily on the Dow. And of course we saw Home Depot, which is basically up on the day, but it’s somewhat of a surprise that they did miss on revenues,” said Peter Cardillo, chief market economist at Rockwell Global Capital.
“From a technical perspective, the S&P managed to hold its 1,850 psychological level two days in a row,” Cardillo said.
Home Depot reported first-quarter earnings below estimates, with the home improvement chain’s spring selling season off to a slow start after a harsh winter in many parts of the nation. Shares of the company gained, however, as it hiked its full-year earnings forecast and said it intends to buy back as much as $3.75 billion additional shares this year.
Staples projected a drop in sales in the current quarter as it competes with online retailers, mass merchants and drugstores, with shares of the office supply retailer falling sharply.
Read More Staples forecasts fall in sales
Dick’s Sporting Goods estimated current-quarter earnings far under analysts’ average estimate and reduced its full-year 2014 adjusted earnings and same-store sales growth outlooks.
After a 116-point fall, the Dow Jones Industrial Average lost 110.48 points, or 0.7 percent, to 16,401.38, with Caterpillar pacing losses that included 24 of 30 components.
The S&P 500 fell 10.24 points, or 0.5 percent, to 1,874.84, with industrials and telecommunications the poorest performing among its 10 major industry groups.
The Nasdaq declined 24.13 points, or 0.6 percent, to 4,101.68.
For every share rising, more than two fell on the New York Stock Exchange, where 259 million shares traded as of 1 p.m. Eastern. Composite volume surpassed 1.4 billion.
The dollar gained against other global currencies and the 10-year Treasury note yield dropped 3 basis points to 2.519 percent.
Crude futures for July delivery fell 16 cents to $102.45 a barrel; gold futures for June delivery rose $1.70 cents to $1295.50 an ounce.
On Monday, stocks eked out a second session of gains in exceedingly light volume.
Read More Internet stocks boost Nasdaq
—By CNBC’s Kate Gibson
Coming Up This Week:
TUESDAY: Fed’s Plosser speaks, Fed’s Dudley speaks, Microsoft Surface event.
WEDNESDAY: Mortgage applications, Fed’s Dudley speaks, Fed’s Yellen speaks, oil inventories, Fed’s George speaks, Fed’s Kocherlakota speaks, FOMC minutes, Boeing investor conference; Earnings from Lowe’s, Target, Hormel, PetSmart, Tiffany, American Eagle Outfitters, L Brands, NetApp, Williams-Sonoma
THURSDAY: Jobless claims, Chicago Fed nat’l activity index, PMI mfg index flash, existing home sales, leading indicators, Kansas City Fed mfg index, Fed’s Williams speaks, Facebook annual mtg, Intel shareholder mtg; Earnings from Best Buy, Dollar Tree, Hewlett-Packard, Gap, Marvel Tech, Ross Stores, Aeropostale, Gamestop, TiVo
FRIDAY: New home sales; Earnings from Foot Locker