Wall Street falls for third straight session worries about Fed rate hike

US stocks slumped for the third straight session on Tuesday as a rise in job openings fuelled concerns that the US Federal Reserve has another reason to maintain its aggressive path of interest rate hikes to combat inflation.

The benchmark S&P 500 index has tumbled more than 5% since Fed Chair Jerome Powell on Friday reaffirmed the central bank's determination to raise interest rates even in the face of a slowing economy.

Labour demand showed no signs of cooling as US job openings rose to 11.239 million in July and the prior month was revised sharply higher. A separate report showed consumer confidence rebounded strongly in August after three straight monthly declines.

"It feeds into a strong labour market, it is also pointing to no apparent concern by consumers and that plays counter to what the market is really looking for," said Andre Bakhos, managing member at Ingenium Analytics LLC in Plainsboro, New Jersey.

"One would construe this normally as good news, however, we have the inflation part that is the concern and these types of numbers do not play well with trying to bring down inflation, at least that is the market’s perception."

The data heightens the focus on the August non-farm payrolls data due on Friday.

The Dow Jones Industrial Average fell 327.54 points, or 1.02%, to 31,771.45, the S&P 500 lost 49.12 points, or 1.22%, to 3,981.49 and the Nasdaq Composite dropped 173.88 points, or 1.45%, to 11,843.79.

New York Fed President John Williams said on Tuesday the central bank will likely need to get its policy rate about 3.5% and is unlikely to cut interest rates at all next year as it fights inflation.

However, Atlanta Fed President Raphael Bostic said in an essay published on Tuesday the Fed could "dial back" from its recent string of 75 basis point hikes if new data shows inflation is "clearly" slowing while Richmond Fed President Thomas Barkin said the Fed's pledge to bring inflation down to its 2% goal will not necessarily result in a severe recession.

Traders are pricing in a 74.5% chance of a third straight 75-basis point rate hike at the Fed's September meeting.

Each of the 11 S&P 500 sectors were in negative territory, with the energy sector down 3.27% as oil prices slid more than 5% on concerns that slowing of global economies could sap demand.

The benchmark 10-year Treasury yield erased early morning losses to trade higher at 3.119%.

Rate-sensitive megacap growth and technology stocks such as Microsoft Corp, down 1.32%, and Apple Inc, offf 1.69%, were the biggest drags on the benchmark index.

Both the S&P 500 and the Nasdaq have broken below their 50-day moving average. The S&P 500 also briefly fell below the 50% Fibonacci retracement level from its June low to August high, another key technical indicator watched by analysts as support.

The CBOE Volatility index, also known as Wall Street's fear gauge, rose for the third straight session and was last trading at 26.92 points.

Adding to worries, Taiwan's military fired warning shots at a Chinese drone which buzzed an islet controlled by Taiwan near the Chinese coast.

Best Buy Co, however, rose 2.25%, the biggest gainer on the S&P 500 after it reported a smaller-than-expected drop in quarterly comparable sales thanks to steep discounts.

Declining issues outnumbered advancing ones on the NYSE by a 4.83-to-1 ratio; on Nasdaq, a 2.92-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 18 new lows; the Nasdaq Composite recorded 7 new highs and 196 new lows.

• Americas