​Stocks down 1 percent on heightened expectations of Fed hikes

NEW YORK - U.S. stocks declined sharply Tuesday after economic reports on inflation and housing pointed to an economy that could be able to withstand further interest rates hikes by the Federal Reserve.

A report out Tuesday had the cost of living rising in April by the most in three years, a sign that inflation could be gaining momentum.

"The inflation reading was a little hotter than expected, and we know it's been a missing ingredient for the Fed," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

The Dow Jones industrial average fell 181 points, or 1 percent, to 17,530. The S&P 500 index dropped 19 points, or 0.9 percent, to 2,047. The Nasdaq composite index slid 60 points, or 1.3 percent, to 4,716.

Of the S&P 500's major industry groups, consumer staples fell the most and energy was the only sector gaining.

"We've had this pretty volatile activity day over day, which suggests the debate rages within the market whether we should break up or break down the trading range that we've been locked in," said Luschini.

Home Depot shares declined after executives at the home-improvement retailer said same-store sales gains narrowed as the first-quarter continued.

Another report had residential starts increasing 6.6 percent to 1.17 million from 1.1 million in March.

Minutes from the Fed's April meeting come Wednesday, with the market pricing in only a slight chance the central bank will hikes rates in June.