Dow falls 260 points as markets reverse from early gains

May 18 (UPI) -- The Dow Jones Industrial Average fell more than 260 points Tuesday as major U.S. markets gave up early gains to close at session lows.

The blue-chip index dropped 267.13 points, or 0.78%, while the S&P 500 dropped 0.85% and the Nasdaq Composite closed the day down 0.56%.

Markets reacted to a Commerce Department report showing that housing starts had fallen 9.5% to a seasonally adjusted annual rate of 1.568 million units last month.

The S&P 500 turned in the worst performance of the major indexes Tuesday with Discovery dropping 1.6% and Comcast falling 0.91% to lead the decline after AT&T announced Monday it would merge WarnerMedia -- which includes HBO and CNN -- with Discovery to form a standalone streaming and entertainment company.

Major retailers also turned in better-than-expected earnings as Walmart stock rose 2.17% to lead the dow after reporting strong grocery sales and e-commerce growth in the fourth quarter.

Lauren Goodwin, an economist and portfolio strategist at New York Life Investments, told CNBC that while growth stocks may be reaching a peak amid concerns about inflation "it's not a bull-market breaker yet."

"Data can't stay at peak levels forever and tailwinds from fiscal stimulus are likely to wind down," Goodwin said. "This can complicate the environment for investors; history suggests that when the economy starts to slow, market returns tend to slow with it."

Also Tuesday, Treasury Secretary Janet Yellen touted the benefit of using tax increases to support stimulus spending at the Chamber of Commerce's Global Forum on Economic Recovery.

"With corporate taxes at a historical low of 1% of GDP, we believe the corporate sector can contribute to this effort by bearing its fair share," Yellen said. "We propose simply to return the corporate tax toward historical norms."