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Stocks fell sharply as investors readjusted their rate cut expectations ahead of the latest FOMC meeting.
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Recent labor cost data added to fears of a hot economy and persistent inflation.
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The stock decline only deepens April’s losses and ends a five-month winning streak.
U.S. stocks tumbled on Tuesday as investors got another dose of inflation data ahead of the Federal Reserve’s next monetary policy decision.
The benchmark S&P 500 index fell over 1% after quarterly labor costs came in higher than expected. The employee cost index, a measure of wages and benefits, rose 1.2% versus a consensus of 1%, the Bureau of Labor Statistics reported.
For the Fed, this represents an even greater constraint on its ability to cut interest rates this year, and futures markets now only expect a rate cut in December. Investors will be watching the Fed’s comments after the FOMC meeting ends on Wednesday.
“Chairman Powell’s policy statement and comments in the press conference will reinforce the Fed’s commitment to bringing inflation back to its 2% target. Unless there is a major crisis, a rate cut before September is off the table, and even that is less likely.” “That seemed just a few weeks ago, given recent data showing a broad rise in the prices of services, homes and labor costs in early 2024,” Bill Adams, chief economist at Comerica Bank, said in a written comment.
The ensuing stock decline only compounded market losses in April, making this month the first month of 2024 to end in the red. The 3.7% decline ended an upward trend that had been ongoing since November.
Meanwhile, shares of McDonald’s fell as much as 3.8% after its earnings report missed estimates. Amazon will report its quarterly results after the closing bell on Tuesday.
Among other notable factors, ceasefire talks between Israel and Hamas caused Brent crude oil to fall 2.6% throughout the day.
Here’s what the US indices stood at the closing bell at 4 p.m. on Tuesday:
Find out what else is going on here:
For commodities, bonds and crypto:
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Oil prices fell. West Texas Intermediate crude fell 1.09% to $81.92 a barrel. Brent crude, the international benchmark, fell 2.6% to $86.14 a barrel.
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Gold fell 1.85% to $2,295.4 an ounce.
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The 10-year Treasury yield rose seven basis points to 4.684%.
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Bitcoin fell 5.4% to $60,358.
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