The Dow Jones industrial average fell 120.93 points, or 1.14%, to 10,513.45. The broader Standard & Poor's 500 index dropped 14.53 points, or 1.18%, to 1,219.34. The tech-heavy Nasdaq composite was down 29.98 points, or 1.38%, to 2,137.06.
Looking ahead to Wednesday, the producer price index for July will be reported. Economists polled by Action Economics are expecting the index to rise by 0.5% in July, after staying flat in June.
In economic news Tuesday, the consumer price index for July rose by 0.5%, after staying flat in June. The rise was higher than the 0.4% increase that economists were expecting. However, the core consumer price index, which excludes food and energy rose 0.1%, lower than the 0.2% forecast.
Housing starts fell 0.1% to 2.042 million in July, from 2.045 million in June (which was revised up from the original estimate of 2.004 million), when economists were expecting a 1.4% rise.
Industrial production data was also weaker than expected. Industrial production rose 0.1% in July, lower than the 0.5% forecast.
Energy futures were lower Tuesday as traders looked ahead to Wednesday's weekly inventory report, which is expected to show increases in crude oil and heating oil and a slight decline in gasoline futures, according to Standard & Poor's MarketScope. September West Texas Intermediate crude oil settled down 19 cents at $66.08 a barrel.
In corporate news, J.P. Morgan Chase (JPM
) agreed to pay Enron at least $350 million to settle claims that it assisted in the fraud that led to the company's collapse. The bank, one of ten Enron sued, also said it would give up certain claims it has filed as part of Enron's bankruptcy proceedings, or pay to retain them.
The Securities and Exchange Commission has warned Goodyear Tire & Rubber (GT
) that it expects to recommend enforcement action against the company for violating accounting rules, the company announced.
In earnings news, Wal-Mart (WMT
) said its second-quarter earnings rose 5.8% to $2.8 billion, or 67 cents per share. The figures were higher than analysts' expected, but lower than the retailer's own targets. The company's projected earnings of between 55 and 59 cents per share in the third quarter also came in lower than analysts were expecting.
Home improvement retailer Home Depot (HD
) reported that second-quarter profit rose 14% to $1.77 billion, which was higher than analysts expected, thanks in part to strong growth in its services business. The company also boosted its earnings per share guidance for the year.
B.J.'s Wholesale Club (BJ
) reported that its second-quarter profit rose a higher than expected 9% to $30.5 million, or 44 cents per share. The group, however, cut its full-year financial guidance, because gasoline sales have not been as profitable as expected.
After Monday's close, Gateway (GTW
) reported a profit of $17.2 million, up from a loss of $339 million in the period last year. However, the computer maker lowered its full-year profit estimate.
Treasury prices rose Tuesday following the release of the weak economic data, with the yield on the benchmark 10-year note falling to 4.23%.
European stock markets closed lower on Tuesday. London's Financial Times-Stock Exchange 100 index fell 21.9 points, or 0.41%, to 5,322.3, following a report that the July consumer price index rose 0.1%, more than expected, which pushed the year-over-year rate to 2.3%.
Germany's DAX index fell 38.53 points, or 0.78%, to 4,883.81. Among the gainers, industrial gases group Linde was up on a report that the company is preparing a defense against a takeover, while Commerzbank rose on a report that CEO Klaus-Peter Mueller won't step down because of a money-laundering probe.
In Paris, the CAC 40 index dropped 22.01 points, or 0.49%, to 4,444.57. Carrefour was higher after J.P. Morgan Chase raised its rating on the stock to overweight from underweight. France Telecom gained after Credit Suisse First Boston reiterated its outperform rating and raised its price target.
Asian markets ended mixed Tuesday.
Japan's Nikkei 225 index closed up 59.12 points, or 0.48%, to 12,315.67, which is the first time since August 2001 the index has closed above 12,300. Gains on Wall Street overnight helped fuel positive sentiment, as stocks of domestically oriented companies extended recent gains on the back of a brighter outlook for the economy.
In Hong Kong, the Hang Seng index closed down 22.44 points, or 0.15% to 15,443.62 amid profit-taking after recent market gains, according to Standard and Poor's MarketScope.