Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

IT ALL STARTED OUT SO NICELY: RALLY TURNS INTO SELLOFF AS EASING MIDDLE EAST TURNS TENSE

What began as a session that promised an extension to Monday's tech rebound and a continued recovery from Friday's rout turned gloomy as the session wore on.

The S&P 500 .SPX and the Nasdaq .IXIC touched their lowest levels in over a month, dragged down by tech shares .SPLRCT in general, and chip stocks .SOX in particular, which dropped 1.8% and 1.9%, respectively.

The S&P 500 and the Nasdaq are now 2.9% and 5.2% below their respective all-time closing highs reached a week ago.

The selloff was exceedingly narrow, with only two of the 11 major sectors of the S&P 500 losing ground on the day; tech was joined by energy .SPNY, which slid 1.6% as crude prices dropped to a seven-week low after Iran and Israel stopped trading airstrikes.

But that fervor was fleeting. President Donald Trump's announcement that Iran shot down a U.S. Apache helicopter that was patrolling the Strait of Hormuz overnight and his vow to respond nipped that optimism in the bud.

"Some are referring to this as a rotational move, but regardless the Summer Swoon has arrived, which means volatility will be with us for the near-term," said Nancy Tengler, CEO of Laffer Tengler Investments.

"Does this mean that the bull market is over? We think not but it also does not mean the selling is exhausted," Tengler added.

The Dow Jones Industrial Average .DJI rose 86.10 points, or 0.17%, to 50,872.11, the S&P 500 .SPX lost 19.08 points, or 0.26%, to 7,386.65 and the Nasdaq Composite .IXIC lost 250.84 points, or 0.97%, to 25,678.82.

On the winning side, airlines .SPCOMAIR, homebuilders .SPCOMHOME, housing stocks .HGX and real estate .SPLRCR - the punching bags of the recent tech-driven rally - were the clear outperformers.

On Wednesday, the Labor Department is due to release its May CPI report, which is expected to show a slight cool-down on a monthly basis but gain some heat, year-over-year.

Analysts expect annual headline and core CPI to land at 4.2% and 2.9%, respectively, a good deal hotter than Warsh & Co.'s 2% target.

Fears that transitory, war-related energy inflation could metastasize into broader, more systemic inflation have financial markets pricing an increasing likelihood of a central bank rate hike by the end of the year. The odds of that very thing are currently at 43.3% versus 13.6% a month ago, according to CME's FedWatch tool.

Here's your closing snapshot:

(Stephen Culp)

*****

EARLIER ON LIVE MARKETS:

UPCOMING IPO WAVE COULD CHANGE WHO WINS IN AI, SAYS BCA CLICK HERE

POLYMARKET BETS SUGGEST BIG GAINS IN SPACEX'S FIRST DAY ON WALL STREET CLICK HERE

SPACEX SET TO TEST A MORE DISCIPLINED IPO MARKET CLICK HERE

THE OLD BALL GAME: TRADE BALANCE, HOME SALES, SMALL BUSINESS SENTIMENT CLICK HERE

MAIN US INDEXES JUMP AT OPEN, BUT GAINS QUICKLY FADE CLICK HERE

S&P 500 DEFENDS KEY LINE AS BULLS PUSH FOR RECOVERY CLICK HERE

MORGAN STANLEY CUTS LONG-STANDING EUROPEAN DEFENCE OVERWEIGHT CLICK HERE

HALF-TIME IN EUROPE: CHIPS AHOY! CLICK HERE

INVESTORS BUILD UP CASH PILES AHEAD OF 'BIG THREE' IPOS CLICK HERE

QUIET START, FTSE LAGS CLICK HERE

BEFORE THE BELL: EUROPE BRINGS SOME CALM TO WORLD MARKETS CLICK HERE

MORNING BID: FORTUNE REALLY HAD BETTER FAVOUR THE BRAVE CLICK HERE