Labour Costs Rise the Most This Year, Signalling Wage Pressures – US Market Wrap

The stock market fell in the final days of April, and bond yields rose on concerns that stubborn inflation will force the Federal Reserve to keep interest rates higher for longer.

On the eve of the Fed’s decision, a broad measure of US labour costs closely watched by policymakers rose the most in a year. The data indicated wage pressures, reinforcing bets that officials will keep interest rates unchanged at a two-decade high on Wednesday and are unlikely to lower them any time soon. That perception, combined with a drop in consumer confidence, weighed heavily on stocks, which experienced their worst month since September.

The last time Fed Chair Jerome Powell spoke, he mentioned the lack of further progress in lowering inflation, as well as the labour market’s continued strength. The latest inflation signals, combined with expectations for a strong employment report on Friday, are unlikely to convince him to change his mind.

The S&P 500 dropped 1.6%, the most since January. Amazon rose in late trading after exceeding earnings expectations. Starbucks reported its first sales drop in over three years.

Treasury two-year yields rose above 5%, the highest level since November. The dollar made its fourth consecutive monthly gain, the longest winning streak since September 2022.