By Anora Mahmudova and Sara Sjolin, MarketWatch

Time Warner Cable rallies on takeover news

U.S. stocks fell in early trade Tuesday as a sharp increase in the dollar destabilized commodity and equity markets, sending investors to pile into havens such as Treasury bonds.

The dollar rallied on the back of the inflation data on Friday and continued its ascent on Tuesday (http://www.marketwatch.com/storyno-meta-for-guid). The ICE dollar index (DXY) jumped 1% to 97, while the greenback climbed to an almost eight-year high against the yen at Yen123.04, up from Yen121.56 on Monday. Oil and gold prices were hit. Meanwhile, Treasurys rose, sending the yield on the 10-year note down 2 basis points to 2.19%.

The S&P 500 (SPX) fell 15 points, or 0.6%, lower at 2,112. The Dow Jones Industrial Average (DJI) dropped 130 points, or 0.7%, to 18,102. The Nasdaq Composite (RIXF) dropped 40 points, or 0.8%, to 5,048.

U.S. markets were closed for Memorial Day on Monday.

The U.S. indexes fell Tuesday, adding to losses from Friday's session when Federal Reserve Chairwoman Janet Yellen warned that a rate hike is still in the cards for 2015.

Investors also assessed durable-goods orders that showed signs of revival in business investment in April.

Positive readings on recent economic data, including a pick up in inflation and job gains, have stoked fears that an interest-rate hike may come sooner than anticipated. A sharp rise in the U.S. dollar also weighed on stocks.

The headline number for durable-good orders fell 0.5% in April, but orders for core capital goods -- a proxy for business investment -- climbed 1% to mark the second-straight gain.

Also read: Signs of revival in business investment seen in April durable-goods report (http://www.marketwatch.com/story/signs-of-revival-in-business-investment-seen-in-april-durable-goods-report-2015-05-26)

"Given that rate hikes will always be 'data dependent', bullish traders won't want to see a meet or beat on April's durable-goods orders," said Brenda Kelly, head analyst at London Capital Group in a note.

"We are back to the heady days where bad news is positive for equities. Assuming we ever left those days," she added.

U.S. house prices rose 0.9% in March to take the year-on-year advance to 5%, according to the S&P/Case-Shiller 20-city composite index (http://www.marketwatch.com/story/city-by-city-look-at-house-prices-as-san-francisco-surges-again-2015-05-26) released Tuesday. With seasonal adjustment, prices were up by 1%, the report said.

New-home sales climbed by more than expected, suggesting improvement in the housing market after sluggish winter months.

Separately, consumer confidence edged higher in May, also topping economists forecasts.

Fed speakers: Fed Vice Chairman Stanley Fischer speaks on "the Fed and the global economy" in Tel Aviv, Israel at 7:30 p.m. local time or 12:30 p.m. Eastern.

In a speech on Monday, Fischer said he sees the Fed's short-term rate at 3.25%-4% in three to four years (http://www.marketwatch.com/story/feds-fischer-sees-short-term-rate-at-325-4-in-three-to-four-years-2015-05-26).

Richmond Fed President Jeffrey Lacker, who is not a voting member of the Federal Open Market Committee this year, gives a speech on financial stability at Louisiana State University in Baton Rouge, La. at 8:10 p.m. Eastern.

Movers and shakers: Shares of Time Warner Cable Inc.(TWC) surged 4.4%, after Charter Communications Inc. (CCMMV) said it will buy the cable-TV company (http://www.marketwatch.com/story/charter-to-merge-with-time-warner-in-55-billion-deal-2015-05-26-61034117) for $55 billion in a cash-and-stock deal. Charter shares were up 1%.

Rival Cablevision Systems Corp. (CVC) and Comcast Corp. (CMCSA) also rose 2% and 1% respectively.

Cerulean Pharma Inc. (CERU) jumped 4% after the biotech company said the U.S. Food and Drug Administration has granted orphan drug designation to its CRLX101 drug, a treatment for ovarian cancer.

For more on notable movers, read Movers & Shakers column (http://www.marketwatch.com/story/autozone-workday-tivo-earnings-in-focus-2015-05-25).

Other markets: European stock markets were mainly lower as investors continued to track developments in Greece's bailout negotiations (http://www.marketwatch.com/story/greece-wont-meet-imf-repayments-in-june-interior-minister-says-2015-05-24). The euro traded as low as $1.0884 on Tuesday, its lowest level since April 28, down from $1.0978 on Monday

Asian markets closed mixed (http://www.marketwatch.com/storyno-meta-for-guid), while oil (http://www.marketwatch.com/storyno-meta-for-guid)(CLN5) and metals prices were hit by the dollar rally.

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