US open: Stocks fall as inflation figures miss forecasts

US stocks fell on Tuesday as data showed inflation slowed more than expected in July.

At 1503 BST, the Dow Jones Industrial Average dropped 0.25% to 18,589.52 points, the S&P 500 shed 0.32% to 2,183.23 and the Nasdaq declined 0.34% to 5,244.32.

In contrast, oil prices gained on a weaker dollar, with West Texas Intermediate crude up 0.3% to $45.90 a barrel and Brent 0.1% firmer at $48.41.

The US consumer price index rose 0.8% year-on-year in July, down from 1.0% the previous month, according to the Labor Department. Economists had forecast a 0.9% increase. The easing in inflation was driven by a 1.6% drop in the energy index.

Core inflation, which excludes volatile energy and food prices, slowed to 2.2% year-on-year growth in July from 2.3% in June, surprising analysts who had expected no change.

The dollar was weaker against major currencies following the report, falling 0.72% against the pound, 0.77% versus the euro and 0.81% against the yen.

“Today’s underwhelming price growth figures follow on the heels of some disappointing data out of the US which will have Janet Yellen and her colleagues at the Fed re-evaluating their interest rate policy," said Dennis de Jong, managing director at UFX.com.

“For much of the summer it had appeared that an interest rate hike was due sooner rather than later. However, with the fall-out from Brexit, volatility in the financial markets and weakening demand fuelling global uncertainty, many now believe Yellen will likely stick rather than twist for the time being."

Yet, New York Federal Reserve president William Dudley told Fox Business News an interest rate hike might be on the table at the September meeting.

The Fed releases on Wednesday the minutes of its 26-27 July policy meeting, which may offer clues on the timing of the next interest rate hike.

Meanwhile, data from the Commerce Department showed US housing starts rose past forecasts in July, climbing 2.1% in July to 1.21m compared to estimates for a 0.8% decline to 1.18m.

Building permits, on the other hand, dipped by 0.1% to 1.152m in July, missing forecasts for a 0.6% gain to1.160m.

Another report from the Federal Reserve showed industrial output rose 0.7% following a 0.4% gain in June, beating expectations of a 0.3% increase.

Manufacturing production climbed 0.5% in July, below estimates for a 0.2% increase and following a 0.3% increase in June.

On the corporate front, Dick’s Sporting Goods shares jumped after the company raised its full year forecast and reported better-than-expected second quarter results.

Home Depot was a touch higher after the retailer’s earnings and revenue for the second quarter came in more or less in line with analysts’ expectations.

TJX Cos. slumped as it reported an increase in quarterly revenue but its full year guidance on earnings missed analysts’ estimates.