US stocks declined the most in two weeks on Tuesday after New York Federal Reserve President William Dudley said an interest rate hike in September was possible. Dudley's comments pulled the three main indexes away from record levels and nudged up bond yields, while the dollar pared earlier losses.
"The labour market is getting tighter and we're starting to see signs of wage gains starting to accelerate, so I think we're getting closer to that point in time when it will be appropriate to actually raise short-term rates again," Dudley, a permanent voting member of the Federal Reserve and a close ally of Fed Chair Janet Yellen, said on Fox Business Network. Bets on a December hike jumped to 42.6 percent from 37.4 percent, according to the CME Group's FedWatch tool.
Investors will pore over the minutes of the Fed's July policy meeting, scheduled for release on Wednesday, for clues on the central bank's rate plans after a blowout June jobs data. At 12:28 pm ET (1628 GMT), the Dow Jones industrial average was down 54.65 points, or 0.29 percent, at 18,581.4, the S&P 500 index was down 7.9 points, or 0.36 percent, at 2,182.25 and the Nasdaq Composite index was down 24.67 points, or 0.47 percent, at 5,237.35. Eight of the 10 major S&P 500 indexes were lower, with the traditionally defensive sectors - telecom service providers and utilities - declining the most.