U.S. stocks opened modestly lower on Tuesday after China raised interest rates for the third time since last October in response to accelerating consumer and asset inflation.

The S&P 500 Index declined 0.06 points, or 0.01 percent, to trade at 1,318.99 at 9:45 a.m. EDT. The Dow Jones Industrial Average declined 0.76 points, or 0.01percent, to trade at 12,160.87. The Nasdaq Composite Index fell 0.06 percent.

China's central bank raised interest rates for the second time in just over a month on Tuesday in a bid to rein in inflation as inflation stayed above 4 percent for a third month. Annual inflation slowed to 4.6 percent in December but is expected to rise further as the cost of food and commodities continues to increase.

The benchmark one-year deposit rates will be lifted by 25 basis points to 3 percent, effective tomorrow, while one-year lending rate will raised by 25 basis points to 6.06 percent.

On the corporate front, Avon Products Inc. (NYSE:AVP) shares declined 5.42 percent as its fourth quarter net income fell to $220 million or $0.50 per share, down from $268 million or $0.62 per share in the same period a year-ago.

Shares of UBS AG (NYSE:UBS) advanced 2.99 percent as the Swiss bank posted its first annual profit since 2006 after fourth-quarter earnings rose.

Sandisk Corp. (NASDAQ:SNDK) shares advanced 2.21 percent as the company stock was upgraded to “buy” rating from “neutral” rating at Sterne Agee.

On Monday, US stocks advanced as a series of merger deals excited investors, pushing the blue-chip indices to two-and-a-half-year highs in the absence of significant economic news.

The euro gained 0.35 percent to 1.3630 against the dollar and the yen advanced 0.23percent against the greenback.

Crude oil futures declined 0.82 percent to $86.76/barrel and gold futures gained 1.13 percent.

European stock markets are currently trading higher with FTSE100 up by 1.54 points, DAX30 up by 19.40 points and CAC 40 up by 8.93 points.

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