2024-04-30 18:59:24
US stocks fell sharply on Tuesday, joining their global counterparts on the way to a monthly loss, as investors await key economic data and the Federal Reserve meets for its two-day policy meeting.
Gold fell, the dollar rebounded and benchmark U.S. Treasury yields rose after the Labor Department reported stronger-than-expected growth in employment costs in the first quarter, which should not change the Fed’s hawkish stance.
“The sell-off was triggered by the higher-than-expected employment cost index,” said Jay Hatfield, portfolio manager at InfraCap in New York. “Investors are positioning ahead of the press conference after the Fed meeting, which should be favorable for taking a hawkish position.
The three major US indexes are on track to experience their first monthly percentage loss since October.
“We’ve hit new highs for the S&P this year, but there comes a point where the market has to digest those gains,” said Sam Stovall, chief strategist at CFRA Research in New York. The old adage “sell in May” may have come true a month earlier than expected.
The Federal Reserve’s Open Market Committee (FOMC) meets on Tuesday for its monetary policy meeting, which is expected to conclude on Wednesday with a decision to leave the target Fed funds rate in the range of 5.25%-5.
The accompanying statement, as well as Fed Chairman Jerome Powell’s subsequent press conference, will be analyzed for clues about the path the central bank intends to take for interest rate cuts.
“We know the Fed is going to be hawkish and there will be questions about rate hikes,” Mr. Hatfield added. “That will be the monetary response, depending on how much pressure he puts on this.
The first-quarter earnings season has reached the halfway mark, with a number of high-profile results expected this week, including results from Amazon.com and Apple Inc.
Analysts now expect first-quarter S&P 500 headline earnings growth of 6.0% year-over-year, compared with an April 1 estimate of 5.1%, according to LSEG data.
The Dow Jones Industrial Average lost 407.17 points, or 1.06%, to 37,978.92. The S&P 500 lost 47.17 points, or 0.92%, to 5,069 and the Nasdaq Composite fell 180.07 points, or 1.13%, to 15,803.01.
European shares finished lower as a series of disappointing results dampened investor sentiment, while economic data was positive and the European Central Bank was more likely to cut interest rates in June.
The pan-European STOXX 600 index lost 0.68% and MSCI’s benchmark of shares around the world lost 0.79%.
Emerging markets lost 0.57 percent. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.38% lower, while Japan’s Nikkei rose 1.24%.
The dollar regained strength against a basket of global currencies and the yen weakened against the dollar, limiting gains after an alleged monetary intervention by Japanese authorities on Monday.
The dollar index rose 0.57%, the euro fell 0.37% to $1.0679.
The Japanese yen weakened 0.86% against the dollar to 157.70 per dollar, while the British pound traded at $1.2503, down 0.46% on the day.
US Treasury yields rose after the release of a stronger-than-expected employment costs report as investors awaited the Fed’s decision.
Benchmark 10-year bonds lost 18/32 to reach a yield of 4.684%, compared with 4.612% last Monday.
The 30-year bond lost 25/32 points to reach a yield of 4.7881%, compared with 4.737% on Monday night.
Crude oil prices fell on easing geopolitical tensions as peace talks between Israel and Hamas made progress and US data showed rising crude production and exports.
US crude fell 0.85% to settle at $81.93 a barrel, while Brent settled at $87.86 a barrel, down 0.61% on the day.
Gold prices fell to their lowest level in a week ahead of the Fed meeting, but remained on track for a third straight monthly gain.
Spot gold fell 1.8% to $2,292.69 an ounce.
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