US stocks finish lower as strong services report backs Fed's view to keep pushing interest rates higher

• US stocks fell Tuesday, turning lower in the post-Labor Day session.
• Stocks gave up earlier gains after a stronger-than-expected ISM services report.

US stocks closed with a loss Tuesday as investors saw a stronger-than-expected report on service-sector activity as providing further reason for rate hikes by the Federal Reserve.

The S&P 500 fell for a third straight session, led by losses in the consumer services and energy sectors. The decline was softened somewhat by gains among sectors considered defensive — real estate, utilities, and health care. Wall Street's major equity indexes have lost ground over the past three weeks.

Stocks gave up gains earlier Tuesday and Treasury yields rose after the Institute for Supply Management said its August index on service-sector activity rose to 56.9%. The reading outstripped Econoday's consensus estimate of 55.4% for activity that drives more than a third of US economic growth.

The Federal Reserve has indicated it sees the US economy slowing but strong enough to withstand more interest rate increases to pull down inflation toward its 2% target.

Here's where US indexes stood at the 4:00 p.m. closing bell on Tuesday:

• S&P 500: 3,908.19, down 0.41%
• Dow Jones Industrial Average: 31,145.30, down 0.55% (173.14 points)
• Nasdaq Composite: 11,544.91, down 0.74%

"The combination of peak hawkishness from the Fed and the frustratingly slow pace at which inflation is cooling could continue to weigh on stocks for another month or more," LPL Financial strategists said in a note published Tuesday.

"Still, we could see potential upside for stocks over the balance of 2022. Some inflation relief is likely coming, which can help foster interest rate stability. Friday's jobs report that many are calling 'Goldilocks,' sets up some needed cooling of labor markets," they said.

Last Friday's jobs report showed the US added 315,000 payrolls in August, beating the forecast for 300,000 new jobs but down from July's scorching addition of 528,000 jobs.

Around the markets, Digital World Acquisition Corp. shares tumbled after the company gave its shareholders more time to vote on a proposal to extend a deadline to merge with Donald Trump's social media company. Truth Media & Technology Group runs the Truth Social networking app.

Nobel laureate Paul Krugman called for gradual interest-rate hikes to avoid crushing economic growth and employment.

Saudi Arabia is lowering oil prices for Asia and Europe but hiking them for most US buyers.

Oil prices tuned lower. West Texas Intermediate crude slipped 0.1% to $86.64 per barrel. Brent crude, the international benchmark, fell 0.2% to $92.69.

Gold fell by 0.7% to $1,711.40 per ounce. The 10-year Treasury yield increased by 14 basis points to 3.33%.

Bitcoin fell 4.5% to $18,848.12.