Rate hike concern weighs on stocks; crude oil up

Tue May 17, 2016 4:34pm EDT
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By Rodrigo Campos

NEW YORK (Reuters) - A global gauge of stocks fell on Tuesday, weighed down by Wall Street on concerns that strong U.S. inflation data could bring closer an expected rate hike from the Federal Reserve.

The U.S. dollar, expected to strengthen if the Fed tightens monetary policy, was little changed. Crude oil futures touched multi-month highs.

A Fed policymaker said he will push for an interest rate hike in June or July and two others still see up to three rate increases this year, leaving the door open to a change in monetary policy relatively soon.

U.S. consumer prices recorded their biggest increase in more than three years in April, while housing starts rose more than expected last month.

"The equity market is taking cues from stronger data and some of the comments from Fed members in terms of maybe hiking more than is priced into the market," said Patrick Maldari, senior fixed income investment specialist at Aberdeen Asset Management in New York.

Traders now see the probability of a rate hike after the Fed's November meeting at 58 percent, up from roughly 42 percent on Monday, according to the CME FedWatch tool.

On Wall Street, stocks were led lower by the more defensive, high-dividend paying sectors, which tend to be sold when more investors expect higher rates.

The Dow Jones industrial average .DJI fell 180.73 points, or 1.02 percent, to 17,529.98, the S&P 500 .SPX lost 19.45 points, or 0.94 percent, to 2,047.21 and the Nasdaq Composite .IXIC dropped 59.73 points, or 1.25 percent, to 4,715.73.   Continued...

Traders work at their desks in front of the German share price index, DAX board, at the stock exchange in Frankfurt, Germany, May 13, 2016.     REUTERS/Staff/Remote