Rising Inflation Data, Financials Pressure U.S. Markets On Tuesday

New York, NY (AHN) - U.S. markets opened Tuesday lower and continued that way, sparked by wholesale inflation data that rose more than double expectations. Financials also weighed on the market as write-down rumors swirled around Lehman Bros.

Before the market opened, the Labor Department reported that wholesale prices rose 1.2 percent in July, much more than the 0.5 economists expected. Year-over-year prices rose at their fastest pace since 1981.

The Dow Jones Industrial average fell 130 points, or 1.1 percent, as 27 of 30 components finished the session lower. American International Group was the main laggard, down more than 5 percent after Goldman Sachs cut its rating on the stock and said there was an increased chance that the insurer may need to raise more capital.

The S&P 500 shed 12 points or 0.95 percent as eight of 10 major economic sectors finished Tuesday lower. The financial sector led the downward slide, losing 3 percent. Lehman Bros. weighed on the sector, falling 12 percent after reports surfaced that the broker may need to take a $4.5 billion write-down in the third quarter.

Nasdaq stocks did not fare much better; the composite dropped 32 points or 1.35 percent on Tuesday. Consumer discretionary stocks also added to the sell-off. The sector fell 2.2 percent after earnings reports from Saks, Target and Home Depot failed to dazzle.

The price of crude oil rose 2.2 percent or $1.66 a barrel. The value of the commodity swung from a 1 percent loss to a 3 percent gain before settling at $114.53 a barrel. The increase helped the energy sector post a 2.8 percent gain as the oil and refiners stocks tacked on 4.3 percent.

Weekly oil inventories data is set for release at 10:35 a.m. ET Wednesday and should add to what has already been volatile trading this week.