Stocks set for monthly drop, dollar rebounds as data, Fed loom large By Reuters

By Stephen Culp

NEW YORK (Reuters) -U.S. stocks turned sharply lower on Tuesday, joining their global counterparts on the path toward a monthly loss as investors await crucial economic data and the Federal Reserve convenes for its two-day policy meeting.

Gold sank, the dollar rebounded and benchmark U.S. Treasury yields ticked higher after the Labor Department reported hotter-than-expected first-quarter employment cost growth, which is unlikely to alter the Fed’s restrictive stance.

“The sell-off was triggered by the higher-than-expected employment cost index,” said Jay Hatfield, portfolio manager at InfraCap in New York. “And investors are positioning ahead of what is likely to be a hawkish press conference following the Fed meeting.”

All three major U.S. 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.

“We know the Fed is going to be hawkish, and there’s going to be questions about rate increases,” Hatfield added. “That will be the money answer, depending how much he pushes back on that.”

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

Analysts now see aggregate first-quarter earnings growth of 6.0% year-on-year, up from the 5.1% estimate as of April 1, LSEG data showed.

The fell 407.17 points, or 1.06%, to 37,978.92. The S&P 500 lost 47.17 points, or 0.92%, at 5,069 and the dropped 180.07 points, or 1.13%, to 15,803.01.

European stocks ended lower as a raft of bleak earnings dampened investor sentiment due to upbeat economic data and the increased likelihood that the European Central Bank could cut interest rates in June.

The pan-European …