Stocks plummeted on Tuesday as markets weighed economic data showing rising labor costs and deteriorating consumer confidence on the eve of a key Federal Reserve policy meeting to decide the direction of interest rates.
The Dow Jones Industrial Average plunged 570.17 points, or 1.5%, to 37,815.92, the S&P 500 slipped 1.6%, and the Nasdaq was down 2%. All three stock indexes recorded their first monthly loss in six.
The Dow slipped 5% in April, its biggest percentage decline since September 2022.
US labor costs increased in the first quarter amid a rise in wages and benefits, confirming the surge in inflation early in the year that will likely delay a much-anticipated interest rate cut later in 2024.
The data comes ahead of the Federal Reserve Open Market Committee’s (FOMC) two-day meeting during the day, with the interest rate verdict and Chair Jerome Powell’s remarks at the end of the event in focus.
“We’re still in an environment where the knee-jerk reaction is to extrapolate any warmer data into firmer inflation and more hawkish reaction from the Fed,” said Garrett Melson, portfolio strategist at Natixis Investment Managers in Boston.
“But nothing has changed: growth is still strong, labor markets are holding up, and ultimately we’re taking a little bit of breather in the disinflation process,” Melson added.
Money markets are largely expecting the central bank to stand pat on interest rates on Wednesday, while pricing in just about 31 basis points (bps) of rate cuts this year, down from about 150 bps estimated at the start of 2024, according to LSEG data.
On the earnings front, GE HealthCare lost 14% after the medical equipment firm missed estimates for first-quarter revenue, while US industrial conglomerate 3M gained 4.7% after posting a better-than-expected quarterly profit.
Eli Lilly jumped 6% after the drugmaker raised its full-year profit forecast.
Of the 265 companies in the S&P 500 that have reported earnings to date for the first quarter, 79.2% have beat analyst estimates, compared with the long-term average of 67%, according to LSEG I/B/E/S data.
US equities have had a rough April as elevated inflation numbers sharply pulled back bets on interest rate cuts, while heightened tensions in the Middle East and earnings updates also added to the volatility.
Meanwhile, US consumer confidence deteriorated in April, falling to its lowest level in more than 1-1/2 years.
Tesla dipped 5.6% following a 15% surge in the previous session after a report that CEO Elon Musk had dismissed two senior executives and plans to lay off hundreds more employees.