The US markets ended lower on Tuesday as traders looked ahead to the Federal Reserve's monetary policy announcement on Wednesday. The two-day Fed meeting that began Tuesday is not likely to result in any changes to monetary policy, but the central bank could signal that it is beginning to think about scaling back its asset purchases. The Fed announcement on Wednesday is likely to acknowledge the recent increase in inflation, which was highlighted by today's Labor Department report showing record annual producer price growth. The Labor Department said its producer price index for final demand advanced by 0.8 in May after climbing by 0.6 percent in April. Street had expected another 0.6 percent increase. Excluding prices for food, energy, and trade services, core producer prices rose by 0.7 in May, matching the increase seen in the previous month.
Core prices were expected to rise by 0.5 percent. Compared to the same month a year ago, producer prices in May were up by 6.6 percent, reflecting the largest increase since 12-month data were first calculated in November 2010. The annual rate of core producer price growth also accelerated to a record high of 5.3 percent in May from 4.6 percent in April. Meanwhile, the Commerce Department released a separate report showing retail sales tumbled by more than expected in the month of May, although the steep drop followed a notable upward revision to the previous month's data. The report said retail sales plunged by 1.3 percent in May following an upwardly revised 0.9 percent increase in April. Street had expected retail sales to slump by 0.8 percent compared to the unchanged reading originally reported for the previous month.
Dow Jones Industrial Average fell 94.42 points or 0.27 percent to 34,299.33, Nasdaq dropped 101.29 points or 0.71 percent to 14,072.86 and S&P 500 was down by 8.56 points or 0.2 percent to 4,246.59.