Financial Markets                      04/30 15:42

   

   NEW YORK (AP) -- More worries about inflation and interest rates staying 
high knocked U.S. stocks lower on Tuesday, as the market closed out its worst 
month since September.

   The S&P 500 tumbled 1.6% to cement its first losing month in the last six. 
Its momentum slammed into reverse in April, falling as much as 5.5% at one 
point, after setting a record at the end of March.

   The Dow Jones Industrial Average dropped 570 points, or 1.5%, and the Nasdaq 
composite lost 2%.

   Stocks began sinking as soon as trading began, after a report showed U.S. 
workers won bigger gains in wages and benefits than expected during the first 
three months of the year. While that's good news for workers and the latest 
signal of a solid job market, it feeds into worries that upward pressure 
remains on the economy and inflation.

   It followed a string of reports this year that have shown inflation remains 
stubbornly high. That's caused traders to largely give up on hopes that the 
Federal Reserve will deliver multiple cuts to interest rates this year. And 
that in turn has sent Treasury yields jumping in the bond market, which has 
cranked up the pressure on stocks.

   Tuesday's losses for stocks accelerated at the end of the day as traders 
made their final moves before closing the books on April, and ahead of an 
announcement by the Federal Reserve on interest rates scheduled for Wednesday 
afternoon.

   No one expects the Federal Reserve to change its main interest rate at this 
meeting. But traders are anxious about what Fed Chair Jerome Powell may say 
about the rest of the year.

   Traders are now mostly betting the Fed will cut rates either one or zero 
times through the balance of 2024, according to data from CME Group. That's a 
big letdown after traders came into the year forecasting six or more cuts.

   The Fed itself was earlier penciling in three cuts to rates during 2024, but 
top officials have recently hinted rates may stay high for longer as they wait 
for more confirmation inflation is heading down toward their 2% target. The 
Fed's main interest rate is sitting at the highest level since 2001, which puts 
downward pressure on the economy and investment prices.

   Without the benefit of easing interest rates, companies will need to deliver 
bigger profits in order to support their stock prices, which critics have 
called broadly too expensive following their run to records.

   GE Healthcare Technologies tumbled 14.3% after it reported weaker results 
and revenue for the latest quarter than analysts expected. F5 dropped 9.2% 
despite reporting a better profit than expected. Its revenue fell short of 
forecasts, and it said customers were remaining cautious and forecasting 
largely flat IT budgets for the year.

   McDonald's slipped 0.2% after its profit for the latest quarter came up just 
shy of analysts' expectations. It was hurt by weakening sales trends at its 
franchised stores overseas, in part by boycotts from Muslim-majority markets 
over the company's perceived support of Israel.

   Helping to keep the market's losses in check was 3M, which rose 4.7% after 
reporting stronger results and revenue than forecast. Eli Lilly climbed 6% 
after turning in a better profit than expected on strong sales of its Mounjaro 
and Zepbound drugs for diabetes and obesity. It also raised its forecasts for 
revenue and profit for the full year.

   All told, the S&P 500 fell 80.48 points to 5,035.69. The Dow dropped 570.17 
to 37,815.92, and the Nasdaq composite fell 325.26 to 15,657.82.

   This earnings reporting season has largely been better than expected so far. 
Not only have the tech companies that dominate Wall Street done well, so have 
companies across a range of industries.

   That's a change from the recent past, and it helped push strategists at 
Deutsche Bank to raise their forecast for full-year earnings growth for the S&P 
500. Many companies are topping forecasts because they've been able to wring 
more profit out of each $1 of revenue than analysts were expecting, according 
to Binky Chadha, chief strategist at Deutsche Bank.

   Such strength could support stock prices even if interest rates end up 
staying high, according to Kristy Akullian, head of iShares Investment 
Strategy, Americas.

   "Equities don't need Fed rate cuts for the rally to continue, all they need 
is solid earnings growth," she said.

   In the bond market, the yield on the 10-year Treasury rose to 4.68% from 
4.61% just before the morning release of the report on employee wages and 
benefits.

   The two-year Treasury yield, which more closely tracks expectations for the 
Fed, jumped back above the 5% level to 5.03% from 4.97% late Monday.

   In stock markets abroad, Japan's Nikkei 225 rose 1.2% after reopening 
following a holiday. The government reported stronger-than-expected gains in 
industrial production for March.

   Indexes were mixed across much of the rest of Asia but lower in Europe.

   ___

   AP Business Writers Yuri Kageyama and Matt Ott contributed.

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