Investing.com-- U.S. stocks fell Tuesday as the focus turns to the upcoming Federal Reserve meeting, especially after the release of more hot inflation data.
At 05:35 ET (09:35 GMT), Dow Jones Industrial Average fell 200 points, or 0.5%, S&P 500 dropped 16 points, or 0.3%, while NASDAQ Composite slipped 60 points, or 0.3%.
The main Wall Street indices are on course to record losses of between 2.4% and 3.6% in April, with sentiment hit as strong economic data, and inflation numbers in particular, saw traders price out expectations for early rate cuts this year.
Sticky inflation weighs on rate cut hopes
Data released earlier Tuesday continued the recent run of firm economic numbers, as U.S. labor costs increased more than expected in the first quarter amid a rise in wages and benefits, confirming the surge in inflation early in the year.
The Employment Cost Index increased 1.2% last quarter after rising by an unrevised 0.9% in the fourth quarter, while labor costs increased 4.2% on a year-on-year basis.
The report followed data last week that showed price pressures heating up in the first quarter.
The Federal Reserve starts its latest two-day policy-setting meeting later in the session, and is widely expected to keep its benchmark overnight interest rate unchanged in the current 5.25%-5.50% range, where it has been since July.
Fed Chair Jerome Powell is likely to offer hawkish signals on the path of interest rates, especially after a series of hotter-than-expected inflation readings.
Investors have largely priced out the likelihood of rate cuts this summer, with September now seen as the favorite month for the Fed to start a rate-cutting cycle, according to the CME Fedwatch tool.
Higher for longer rates bode poorly for stock markets, given that they weigh on economic activity as well as limiting speculation by putting a cap on liquidity.
Eli Lilly soars on hiked guidance
The first-quarter earnings season has continued Tuesday.
Eli Lilly (NYSE:LLY) stock rose 7% after after the pharmaceutical giant reported better-than-expected earnings for its first quarter, and hiked its full-year guidance on strong sales of its blockbuster diabetes drug Mounjaro and newly launched weight loss treatment Zepbound.
3M Company (NYSE:MMM) stock rose 2% after the industrial conglomerate topped analysts’ expectations for its first quarter, adding that it expects its dividend payout ratio to be approximately 40% of adjusted free cash flow.
PayPal (NASDAQ:PYPL) stock rose 3% after the payments system operator posted a better-than-anticipated 14% year-on-year uptick in first-quarter total payment volume to $403.9 billion.
Coca-Cola (NYSE:KO) edged higher after the beverage giant reporting quarterly earnings and revenue that beat expectations, and raised its full-year outlook for organic revenue.
Online retail giant Amazon (NASDAQ:AMZN) is set to report after the close.
Aside from this, Paramount Global (NASDAQ:PARA) has announced that Chief Executive Bob Bakish has stepped down amid ongoing talks over a potential tie-up talks with David Ellison's Skydance Media.
HSBC (NYSE:HSBC) said on Tuesday that Chief Executive Noel Quinn will retire after nearly five years in the role, where he oversaw a major transformation in the bank that drastically improved its cash position and earnings.
Crude mixed with focus on Israel-Hamas peace talks
Oil prices steadied Tuesday, after the prior session's losses as focus remained on any progress in ceasefire talks between Israel and Hamas.
By 05:35 ET, the U.S. crude futures traded 0.7% lower at $82.06 a barrel, while the Brent contract rose 0.5% to $87.59 a barrel.
Both benchmarks lost around 1% on Monday after peace talks in Cairo between Israel and members of the militant group Hamas resulted in traders unwinding some of the geopolitical risk premium in oil prices.
Fears of disruptions in Middle East supply have been a key booster of oil prices in recent weeks. But this notion somewhat eased after a conflict between Iran and Israel did not give way to war.
(Ambar Warrick contributed to this article.)
