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US: Stocks tumble as Fed rate hike expectations rise

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[NEW YORK] US stocks tumbled Tuesday, reversing the prior session's gains, with some analysts attributing the move to higher odds the Federal Reserve will move more quickly to hike interest rates.

US economic data was solid, with industrial production, consumer prices and housing starts all rising in April.

"Investors are taking good economic news as bad investment news, because it will prompt the Federal Reserve to come and raise rates more aggressively," said Jack Ablin.

But Art Hogan, chief market strategist at Wunderlich Securities, said there is a very low chance the Fed will hike rates at the next opportunity in June. Rising volatility in stocks reflects the lack of market-moving news this week, he said.

"We're struggling for some direction," Mr Hogan said.

The Dow Jones Industrial Average lost 1.0 per cent at 17,529.98.

The broad-based S&P 500 fell 0.9 per cent to 2,047.21, while the tech-rich Nasdaq Composite Index dropped 1.3 per cent to 4,715.73.

Some of the bigger drags on the Nasdaq included Amazon, down 2.2 per cent, Microsoft, down 2.6 per cent, and Activision Blizzard, down 3.2 per cent.

Consumers staples stocks were also in retreat, with Kraft Heinz losing 4.3 per cent and ConAgra Foods, Mondelez and General Mills all losing more than two per cent. Analysts said shares in the sector have risen considerably and were due for a pullback.

Dow member Home Depot dropped 2.5 per cent despite reporting earnings that bested analyst expectations and lifting its 2016 forecast. However, analysts said the good news was already built into the stock's lofty valuation.

Peer-to-peer finance company Lending Club sank 8.6 per cent after disclosing that it faces government probes into the sudden departure of Renaud Laplanche as chief executive. Lending Club also said the shakeup had prompted a number of key investors in the loans the company generates to pause on further business, reducing the number of loans it can process.

TJX, parent company of off-price apparel stores Marshall's and TJ Maxx, climbed 0.5 per cent as net income for the first quarter rose 7.1 per cent to US$508.3 million behind a 10 per cent increase in sales. The figures were far better than those released by apparel retailers last week.

AFP