U.S. stocks fell on Tuesday as markets priced in economic data showing rising labor costs and deteriorating consumer confidence, ahead of a key Federal Reserve meeting that will decide the direction of interest rates.
Data showed Tuesday that U.S. labor costs rose a more-than-expected 1.2% in the latest quarter, indicating rising wage pressures. A survey also found that U.S. consumer confidence deteriorated in April, falling to its lowest level in more than a year and a half.
These reports were released a day before the start of the two-day meeting of the Federal Reserve Open Market Committee (FOMC), with investors widely expecting the central bank to leave interest rates unchanged.
Ten of the 11 sectors in the S&P 500 Index were lower, led by stocks in the energy, consumer discretionary, materials, industrials and technology sectors. Shares in the utilities and healthcare sectors rose after erasing losses suffered early in the session.
Stocks of the “Magnificent Seven” were also down. Tesla lost 5%, Alphabet 1.1%, Nvidia 1%, Microsoft 1.6% and Amazon 0.6%.
“We’re still in an environment where the knee-jerk reaction is to extrapolate any warmer data into firmer inflation and a more hawkish reaction from the Fed,” Garrett Melson, portfolio strategist at Natixis Investment Managers, said in a statement. Boston.
“But nothing has changed: growth remains strong, job markets are holding up and, ultimately, the disinflation process is running out of steam a little,” added Mr. Melson.
Money markets are only pricing in around 31 basis points (bps) of rate cuts this year, compared to 150 bps estimated at the start of 2024, according to LSEG data.
As of 2:16 p.m., the Dow Jones Industrial Average was down 365.34 points, or 0.95%, at 38,020.75, the S&P 500 was down 41.94 points, or 0.82%, at 5,074.23. and the Nasdaq Composite lost 165.79 points, or 1.04%, to 15,817.29.
Shares of GE HealthCare fell 13.3% after its first-quarter revenue missed analysts’ estimates, while 3M gained 3.3% after posting quarterly profit that beat forecasts.
Drugmaker Eli Lilly jumped 6% after raising its full-year profit forecast. PayPal rose 2% after raising its full-year adjusted profit forecast.
McDonald’s rebounded from early losses and rose 0.1% after missing quarterly profit estimates for the first time in two years.
Of the 265 S&P 500 companies that reported first-quarter earnings, 79.2% beat analyst estimates, compared to a long-term average of 67%, according to data from LSEG I/B/E/S . Declining stocks outnumbered rising stocks by a ratio of 3.76 to 1 on the NYSE. On Nasdaq, 1,225 stocks rose and 2,880 fell, with falling stocks outnumbering rising stocks by a ratio of 2.35 to 1.
The S&P 500 recorded 18 new 52-week highs and 6 new lows, while the Nasdaq recorded 45 new highs and 99 new lows.
