By Sinéad Carew and Anisha Sircar
(Reuters) - Wall Street's three major indexes closed lower on Tuesday, following a rally last week, as volatile oil markets kept soaring inflation in focus and investors reacted to hawkish comments from a Federal Reserve official.
After outperforming earlier in the session, the S&P's energy sector lost ground after a report that some producers were exploring the idea of suspending Russia's participation in the OPEC+ production deal.
Federal Reserve policy was also top of mind for investors as U.S. President Joe Biden and Fed Chair Jerome Powell met on Tuesday to discuss inflation, which Biden said ahead of the meeting was his "top priority."
This was after Fed Governor Christopher Waller said on Monday the U.S. central bank should be prepared to raise rates by a half percentage point at every meeting from now on until inflation is decisively curbed.
"The market's trying to figure out the endgame for the Fed," said Jack Janasiewicz, portfolio manager at Natixis Investment Management solutions.
And while lower commodity prices would be good news for equities in the longer term, the impact of the report about OPEC and Russia on the energy sector may have spooked the broader market a little on Tuesday.
"That's the sort of thing that has the market on edge," said Janasiewicz. "When we started out, the sector leading us higher was energy."
By the session's close, the biggest decliner among the S&P's 11 major industry sectors was energy, down 1.6%.
The only sector gainers were consumer discretionary, up 0.8%, with Amazon.com (NASDAQ:AMZN) the S&P's biggest boost from a single stock on the day, and communications services, up 0.4%, as Google (NASDAQ:GOOGL) was the S&P's next biggest contributor.
The Dow Jones Industrial Average fell 222.84 points, or 0.67%, to 32,990.12, the S&P 500 lost 26.09 points, or 0.63%, to 4,132.15 and the Nasdaq Composite dropped 49.74 points, or 0.41%, to 12,081.39.
All three indexes had rallied last week to snap a decades-long losing streak.
With Tuesday's decline, the S&P and the Dow were essentially unchanged for May. The Nasdaq showed a monthly decline of 2%.
"There're too many concerns at the moment for markets to do a sharp V-bottom," said Carol Schleif, deputy chief investment officer at BMO Family Office, who sees equities trading sideways for some time due to uncertainties including the Russia-Ukraine war, the global economy and inflation, as well as Fed policy.
"A piece of it is energy prices because at the margin those really impact people's propensity to spend. People are really noticing the higher prices at the grocery store," she said.
Earlier in the day, data showed U.S. consumer confidence eased modestly in May amid persistently high inflation and rising rates, while a separate reading showed U.S. home price growth unexpectedly heated up to record levels in March.
Other key data due this week is the monthly non-farm payrolls numbers for cues on the labor market.
U.S.-listed shares of Yamana Gold (NYSE:AUY) Inc climbed 3.7%after South African miner Gold Fields (NYSE:GFI) Ltd agreed to buy the Canadian miner in a $6.7 billion all-share deal.
Dexcom (NASDAQ:DXCM) Inc closed up 3% after the glucose monitoring systems maker denied a report on merger talks with insulin pump maker Insulet (NASDAQ:PODD) Corp.
Declining issues outnumbered advancing ones on the NYSE by a 1.82-to-1 ratio; on Nasdaq, a 1.44-to-1 ratio favored decliners.
The S&P 500 posted four new 52-week highs and 29 new lows; the Nasdaq Composite recorded 53 new highs and 58 new lows.
On U.S. exchanges 15.52 billion shares changed hands on Tuesday, compared with the 20-day moving average of 13.25 billion.