NEW YORK (Reuters) -U.S. stocks ended lower 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.
Data showed on Tuesday that U.S. labor costs rose by a more-than-expected 1.2% last quarter, indicating an uptick in wage pressures. A survey also found that U.S. consumer confidence worsened in April, dropping to its lowest level in more than 1-1/2 years.
The reports came a day before the Federal Reserve Open Market Committee (FOMC) ends its two-day meeting, with investors widely expecting the central bank to leave interest rates unchanged.
All 11 S&P 500 sectors ended lower, led by stocks in energy, consumer discretionary, materials, industrials and technology sectors.
Every Magnificent Seven stock also finished lower, including Tesla, Alphabet, Nvidia, Microsoft, and Amazon. Amazon shares rose 3.1% in extended hours trading after it reported first quarter results that beat analyst estimates.
“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 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.
The Dow Jones Industrial Average fell 570.17 points, or 1.49%, to 37,815.92, the S&P 500 lost 80.48 points, or 1.57%, to 5,035.69 and the Nasdaq Composite lost 325.26 points, or 2.04%, to 15,657.82.
For the month, the S&P 500 fell 4.2%, the Nasdaq lost 4.4%, and Dow fell 5%. The S&P 500 and the Nasdaq registered their biggest monthly percentage decline since September 2023 while the Dow registered its biggest decline since September 2022.
Shares of GE HealthCare shrank 14.3% after its first-quarter revenue missed analyst estimates, 3M gained nearly 5% after posting a better-than-expected quarterly profit.
Drugmaker Eli Lilly jumped almost 6% after it raised its full-year profit forecast. PayPal rose 1.4% after raising its full-year adjusted 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.
Declining issues outnumbered advancers by a 4.6-to-1 ratio on the NYSE. On the Nasdaq, 1,183 stocks rose and 3,028 fell as declining issues outnumbered advancers by a 2.56-to-1 ratio.
The S&P 500 posted 18 new 52-week highs and 7 new lows while the Nasdaq recorded 53 new highs and 119 new lows.
Volume on U.S. exchanges was 11.3 billion shares, compared with the 11 billion average for the full session over the last 20 trading days.
(Reporting by Chibuike Oguh in New York; additional reporting by Shristi Achar A and Shashwat Chauhan in Bengaluru; Editing by Aurora Ellis)
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