S&P 500, Dow slip as telecom stocks eclipse upbeat results from retailers

The S&P 500 and the Dow fell on Tuesday as sharp declines in telecom stocks and a weak housing starts data overshadowed upbeat earnings from Walmart and Home Depot.

AT&T Inc shed 7%, the top drag on the benchmark S&P 500, as it extended declines from Monday, when the telecoms firm said it would cut its dividend payout ratio as a result of its $43 billion media asset deal with broadcaster Discovery Inc .

T-Mobile and Verizon Communications also dropped 2.6% and 1.2%.

The three main indexes opened higher after Walmart, the world's biggest retailer, raised its full-year earnings forecast and Home Depot reported quarterly same-store sales above estimates.

Despite strong results, Home Depot's shares came under pressure due to the lack of a solid outlook and disappointing housing data.

"There is a lot of talk with inflation pressure and how much is transitory and how much is to stay," said Jordan Kahn, chief investment officer of ACM Funds.

"In the case of retailers there is a lot of supply chain restrictions that are adding to pricing pressures. However, the pressures seems to be transitory in nature as most retailers will be able to pass on higher costs."

Latest data showed, US homebuilding fell more than expected in April, likely pulled down by soaring prices for lumber and other materials.

Wall Street's main indexes fell on Monday on fears that an overheating economy could prompt the Federal Reserve to rein in its monetary support following a spike in volatility last week after strong inflation readings.

The benchmark S&P 500 is about 2% from its all-time high, while the tech-heavy Nasdaq is about 6% from its April 29 record high.

Fund managers trimmed their overweight positions on technology stocks to a three-year low as inflation worries left growth stocks vulnerable to a pullback, and turned overweight on UK stocks for the first time in sever years, a survey from Bank of America showed.

Minutes from the Fed's April policy meeting will be parsed on Wednesday for the central bank's view of the economy.

At 10:17 a.m. ET, the Dow Jones Industrial Average fell 59.75 points, or 0.17% , to 34,268.04 and the S&P 500 lost 1.81 points, or 0.04 %, to 4,161.48. The Nasdaq Composite gained 67.22 points, or 0.50 %, to 13,449.31.

Tesla Inc dropped 0.8% after the family office run by "Big Short" investor Michael Burry disclosed a short position worth more than half a billion against the electric-car maker.

China's Baidu Inc gained 1.8% after reporting a 25% rise in quarterly revenue, powered by advertising on its core search and video-streaming platforms.

Macy's climbed 1.5% after the department store operator raised its forecast for annual sales and earnings.

Advancing issues outnumbered decliners by a 1.2-to-1 ratio on the NYSE and by a 2-to-1 ratio on the Nasdaq.

The S&P 500 posted 38 new 52-week highs and no new low, while the Nasdaq recorded 86 new highs and 25 new lows.