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Stocks fell sharply as investors readjusted their expectations for rate cuts ahead of the latest FOMC meeting.
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Concerns about the economy's overheating and persistent inflation have been further heightened by the latest labor cost figures.
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The drop in stock prices only compounded April's losses, ending a five-month streak of gains.
U.S. stocks fell sharply on Tuesday as investors received fresh data on inflation ahead of the Federal Reserve's next policy decision.
The benchmark S&P 500 index fell more than 1% after quarterly payroll costs exceeded expectations. The Bureau of Labor Statistics reported that the Employee Cost Index, a measure of wages and benefits, rose 1.2% versus a consensus of 1%.
For the Fed, this puts further constraints on its ability to cut rates this year, with futures markets currently expecting only one rate cut in December. Investors will keep an eye on the Fed's commentary after Wednesday's FOMC meeting.
“Chairman Powell's comments in the policy statement and press conference reiterate the Fed's determination to return inflation to its 2% target. Barring a major crisis, a rate cut is unlikely before September. But this seems less likely than it was in September, given recent data showing widespread increases in prices for services, housing and labor costs in early 2024. Bill Adams, chief economist at Comerica Bank, said in a written commentary.
The subsequent decline in stock prices further widened the market losses in April, ending the first month of 2024 in the red. The 3.7% decline ended the bull market that had been going on since November.
Meanwhile, McDonald's stock fell as much as 3.8% after the company's earnings report fell short of expectations. Amazon will release its quarterly results after the closing bell on Tuesday.
Among other notable developments, Brent crude oil fell 2.6% throughout the day due to ceasefire talks between Israel and Hamas.
Here are the U.S. indices as of Tuesday's close at 4 p.m.
Here's what else is happening today:
In Commodities, Fixed Income and Cryptocurrencies:
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Oil prices have fallen. West Texas Intermediate crude oil fell 1.09% to $81.92 per 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 per ounce.
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The yield on the 10-year U.S. Treasury rose 7 basis points to 4.684%.
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Bitcoin fell 5.4% to $60,358.
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