(Bloomberg) — Stocks joined losses in bonds after a report showing surprisingly high labor costs reinforced speculation the Federal Reserve will be in no rush to cut interest rates.
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Just a day ahead of the Fed decision, equities came under renewed pressure as the employment cost index increased the most in a year and topped all estimates. As Treasury yields climbed, swap contracts showed slightly lower odds of monetary easing in 2024. The dollar advanced against all of its developed-market counterparts.
“To the extent the Fed would like to see a cooler labor market as a means to bring down consumer supercore inflation, this report is one more reason for the Fed to exercise caution before considering any sort of policy easing,” said Will Compernolle at FHN Financial.
The S&P 500 was on pace for its worst month this year. Amazon.com Inc., which reports results after the closing bell, is expected to say that sales grew 12% in the first quarter, fueled by its cloud computing and advertising businesses.
Sticky US inflation this year isn’t necessarily bad news for the stock rally as higher yields are a reflection of strong economic growth, according to HSBC strategists led by Max Kettner.
“If the Fed’s cuts turn out to be more like the recalibration in the mid-1990s and 2019, it may not necessarily be bad news for risk assets,” they wrote.
Corporate Highlights:
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McDonald’s Corp. results fell short of expectations in the first quarter, hampered by slowing growth in the US and the reverberations of the Israel-Hamas war.
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Coca-Cola Co. issued a more optimistic 2024 forecast after first-quarter results outpaced Wall Street’s expectations.
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3M Co. plans to slash its dividend, ending more than six decades of boosting the payout each year as it enters a new era following the spinoff of its health-care products division.
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Eli Lilly & Co. raised its annual outlook for sales and profit as the company races to satisfy soaring demand for its blockbuster weight-loss and diabetes drugs.
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PayPal Holdings Inc.’s payment volume climbed 14% in the first quarter on increased consumer spending globally.
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Meta Platforms Inc.’s social media platforms Facebook and Instagram are under investigation from the European Union amid concerns they’re failing to cull targeted disinformation peddled by Russia that aims to sow discord on the continent.
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Walmart Inc.’s deal to buy smart-TV maker Vizio Holding Corp. will undergo an in-depth antitrust review by the Federal Trade Commission, Vizio said Tuesday.
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Archer-Daniels-Midland Co.’s profit fell less than expected in the first quarter as an increase in the crop trader’s processed volumes helped partly offset lower pricing and margins.
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Paramount Global replaced Chief Executive Officer Bob Bakish, appointing a management committee as the board negotiates a possible change in control of the company.
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MicroStrategy Inc. posted a first-quarter loss after taking an impairment change against the value of its roughly $13 billion in Bitcoin holdings even though the cryptocurrency surged during the period.
Key events this week:
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Holiday across much of Europe, Wednesday
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Treasury’s quarterly refunding announcement, Wednesday
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US ADP employment change, JOLTS job openings, ISM Manufacturing, Wednesday
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Federal Reserve rate decision, Wednesday
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Eurozone S&P Global Manufacturing PMI, Thursday
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US factory orders, initial jobless claims, trade, Thursday
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Apple earnings, Thursday
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Eurozone unemployment, Friday
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US unemployment, nonfarm payrolls, ISM Services, Friday
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Chicago Fed President Austan Goolsbee speaks, Friday
Some of the main moves in markets:
Stocks
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The S&P 500 fell 0.3% as of 9:30 a.m. New York time
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The Nasdaq 100 fell 0.4%
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The Dow Jones Industrial Average fell 0.3%
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The Stoxx Europe 600 fell 0.5%
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The MSCI World index fell 0.3%
Currencies
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The Bloomberg Dollar Spot Index rose 0.4%
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The euro fell 0.2% to $1.0704
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The British pound fell 0.3% to $1.2525
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The Japanese yen fell 0.7% to 157.48 per dollar
Cryptocurrencies
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Bitcoin fell 2.8% to $61,188.1
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Ether fell 5.2% to $3,012.26
Bonds
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The yield on 10-year Treasuries advanced five basis points to 4.67%
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Germany’s 10-year yield advanced five basis points to 2.59%
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Britain’s 10-year yield advanced five basis points to 4.34%
Commodities
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West Texas Intermediate crude fell 0.6% to $82.17 a barrel
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Spot gold fell 1.3% to $2,305.08 an ounce
This story was produced with the assistance of Bloomberg Automation.
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