Stocks Edge Down From Record Highs -- US Commentary

(RTTNews) - Stocks were lower Tuesday after Federal Reserve officials made hawkish comments despite anemic inflation data.

Rate-sensitive telecom and utilities stocks were particularly weak, while energy shares nudged higher on surging oil prices.

The Dow Jones Industrial Average closed down 83 points, or 0.5 percent, at 18,552, while the S&P 500 index dropped 12 points, or 0.6 percent, to 2,178, and the Nasdaq Composite Index finished off 34 points, or 0.7 percent, at 5,227.

The S&P 500, Dow industrials, and Nasdaq Composite all set all-time closing highs Monday.

U.S. consumer prices were unchanged in July, the weakest reading in since February, as gasoline prices tumbled.

As expected, the Labor Department's Consumer Price Index was flat following two straight monthly increases of 0.2 percent.

Meanwhile, U.S. housing starts rose to a 5-month high in July amid exceedingly low interest rates, the Commerce Department said Tuesday.

Housing starts last month rose 2.1 percent from June to an annual rate of 1.211 million.

However, that's significantly slower than the 5.1 percent pace of improvement seen in June from May.

Also, building permits, which had been on the rise three months in a row, were down 0.1 percent.

Federal Reserve Bank of New York President William Dudley indicated that the U.S. economy has evolved into a shape that could justify a rate hike as early as next month.

"We are edging closer toward the point in time where I think it will be appropriate to raise interest rates further," Dudley told Fox Business Network.

Atlanta Fed President Dennis Lockhart agrees.

"Early indications of third-quarter GDP growth suggest a rebound. I don't believe momentum has stalled," despite the weak headline for second quarter growth, Atlanta Lockhart said in a speech to the Rotary Club of Knoxville, Tennessee.

"I, as one Fed policymaker, am not prepared to rule out at least one rate hike before year's end," he said.

San Francisco Fed President John Williams argued that central banks might have to raise inflation targets so as to give monetary policy more room for maneuver in changing economic outlook.

"There is simply not enough room for central banks to cut interest rates in response to an economic downturn when both natural rates and inflation are very low," Williams wrote in a paper published on Monday.

In corporate news, Apple plans to increase its investment in China, the iPhone maker's biggest market after the US, and also set up its first Asia-Pacific research and development center in the country.

Warrenn Buffett has upped his stake in Apple, news reports said. Apple shares inched hihger.

Home Depot (HD) said same store sales were up 5.4 percent in the second quarter. The stock was flat.