Stocks set for monthly drop

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US stocks headed lower on Tuesday, joining their global counterparts on the path toward a monthly loss as crucial economic data waits in the wings and the US Federal Reserve convenes for its two-day policy meeting.

Gold sank, the dollar rebounded and benchmark US Treasury yields ticked higher after a report from the Labour Department showed hotter-than-expected first-quarter employment cost growth, which is unlikely to alter the Fed’s restrictive stance.

All three major US indexes are on track for their first monthly percentage losses since October.

“We have reached new highs in the S&P this year, but there comes a time when a market needs to digest those gains,” Sam Stovall, chief investment strategist of CFRA Research in New York. “The old ‘sell in May’ adage might have come true a month early.”

The Federal Reserve Open Market Committee (FOMC) gathers on Tuesday for its monetary policy meeting, which is expected to culminate on Wednesday with a decision to leave the Fed funds target rate in the 5.25%-5.50% range.

The accompanying statement, as well as Fed Chair Jerome Powell’s subsequent press conference, will be parsed for clues regarding the central bank’s expected path forward with respect to interest rate cuts.

“The market is being staggered by a combination of punches delivered by the Fed, the consumer and the overall economy, “Stovall added. “And instead of the four, five or six rate cuts that had been anticipated earlier, now the question is, will we get even one this year?”

First-quarter earnings season has passed its halfway point, with a host of high profile results on tap this week, among them Amazon.com and Apple Inc.

Analysts now see aggregate S&P 500 first quarter earnings growth of 6.0% year-on-year, up from the 5.1% estimate as of April 1, according to LSEG.

The Dow Jones Industrial Average fell 137.3 points, or 0.36%, to 38,248.79, the S&P 500 lost 9.44 points, or 0.18%, to 5,106.73 and the Nasdaq Composite dropped 34.81 points, or 0.22%, to 15,948.28.

European stocks softened as investors digested a raft of mixed corporate earnings.

The pan-European STOXX 600 index lost 0.31% and MSCI’s gauge of stocks across the globe shed 0.18%.

Emerging market stocks lost 0.44%.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.29% lower, while Japan’s Nikkei rose 1.24%.

The dollar regained some strength against a basket of world currencies and the yen weakened in the aftermath of suspected currency intervention on the part of Japanese authorities on Monday.

The dollar index rose 0.37%, with the euro down 0.16% to $1.0702.

The Japanese yen weakened 0.64% versus the greenback at 157.33 per dollar, while sterling was last trading at $1.2523, down 0.30% on the day.

US Treasury yields inched higher as investors awaited the Fed decision.

Benchmark 10-year notes fell 12/32 in price to yield 4.6591%, from 4.612% late on Monday.

The 30-year bond fell 15/32 in price to yield 4.7681%, from 4.737% late on Monday.

Crude prices dropped on easing geopolitical tensions as Middle East peace talks moved forward and US data showed healthy crude output and exports.

US crude fell 1.5% to $81.39 per barrel and Brent was last at $85.49, down 1.96% on the day.

Gold prices dropped ahead of the Fed meeting, but remained on course for their third consecutive monthly gain.

Spot gold dropped 1.6% to $2,297.88 an ounce.