US stocks fell on Tuesday as a jump in US Treasury debt yields triggered a sell-off in financial stocks amid renewed concerns about prospects for more interest-rate hikes ahead.
A drop in the shares of such rate-sensitive stocks like American Express Co and American International Group Inc helped offset gains among technology bellwether stocks like Intel Corp and IBM.
The Dow Jones industrial average was down 39.06 points, or 0.35 percent, at 11,235.47. The Standard & Poor's 500 Index was down 7.85 points, or 0.60 percent, at 1,297.23. The Nasdaq Composite Index was down 19.88 points, or 0.86 percent, at 2,294.23.
A larger-than-expected jump in February's underlying producer prices and optimistic comments about the US economy's health from Federal Reserve Chairman Ben Bernanke prompted investors to sell stocks as a jump in yields in the US Treasury bond market signalled the chance that increases in interest rates might last longer than some had expected.
"The spike in yields is scaring equity investors here. You've got a volatile market on its way down," said Brian Williamson, vice president, equity trading of The Boston Co Asset Management. "The rate concerns are also partly to do with Bernanke's comments."
In a speech late on Monday, Bernanke said that even an expected drop in the housing sector would not hurt consumption enough to derail the country's solid economic growth.
Bernanke, the new Fed chairman, will chair his first Federal Reserve policy-meeting next Monday and Tuesday. Wall Street widely expects the Fed to raise its key fed funds rate by a quarter-percentage-point to 4.75 percent from 4.5 percent on Tuesday.
Higher interest rates hurt corporate profits and stifle consumer spending. For banks, rate increases have increased their borrowing costs and crimped the money they can make on loans.
Shares of American Express, one of the biggest US financial services companies and a Dow component, dropped nearly 1 percent, or 53 cents, to $53.59 on the New York Stock Exchange.
The stock of AIG, the world's largest insurer by market value, dropped 1.6 percent, or $1.08, to $67.33 on the NYSE. Both stocks were among the biggest drags on the Dow. AIG contributed the most to the S&P 500's decline.
Shares of Intel, the world's largest chip maker, rose 0.8 percent, or 16 cents, to $19.78 on the Nasdaq, while shares of International Business Machines Corp, the world's biggest computer company, gained 0.3 percent, or 26 cents, to $83.81 on the NYSE.
Traders said technology shares were benefiting from renewed buying following their recent underperformance, particularly by the chip makers.
Volume on the NYSE was moderate, with about 1.57 billion shares changing hands, below last year's daily average of 1.61 billion. On Nasdaq, about 2.4 billion shares traded, above last year's daily average of 1.8 billion.
Decliners outnumbered advancers by a ratio of about 8 to 3 on the NYSE, while on Nasdaq, about two stocks fell for every one that rose.