By Shashwat Chauhan and Shristi Achar A
(Reuters) – U.S. stocks fell on Tuesday, reversing early gains amid a broad sell-off as investors grew nervous in the run-up to a key inflation print later in the week that could influence the Federal Reserve’s policy easing stance this year.
In focus is the March reading of the U.S. Consumer Price Index (CPI), due on Wednesday, that is expected to show a rise in headline inflation to 3.4% year-on-year, from 3.2% in February.
The core figure, which excludes volatile components such as food and energy, is expected to ease to 3.7% year-on-year, versus 3.8% in February.
“Given the strength of the economic data, it’s getting easier and easier to defend the notion that we might be closer to an overheating economy than one nearing recession,” said Dave Grecsek, managing director in investment strategy & research at Aspiriant.
“At the moment, three rate cuts this year seems a little demanding.”
Amid signs of a robust U.S. economy, investors have been scaling back expectations for how much the central bank will cut interest rates this year. Current bets of around a 60-basis-point easing are the lowest they have been since October according to LSEG data, compared to about 150 bps priced in at the start of 2024.
Traders see a nearly 57% chance of an at-least 25 bps cut in June, according to the CME’s FedWatch Tool, down from 64% last week.
Megacap growth stocks including Nvidia (NASDAQ:), Meta Platforms (NASDAQ:) and Microsoft (NASDAQ:) fell between 0.2% and 2.9%, weighing on the indexes.
Financial stocks also added to the losses, with the Index down 0.8% and leading sectoral declines.
Adding to the market’s jitters, the commander of Iran’s Revolutionary Guard’s navy said Israel’s presence in the United Arab Emirates was viewed as a threat by Tehran and it could close the Strait of Hormuz if deemed necessary.
Minutes of the Fed’s March meeting – where it stuck to its guidance of three rate cuts this year – are due later in the week and could be key in gauging where the central bank stands on policy easing.
At 12:02 p.m. ET, the was down 146.83 points, or 0.38%, at 38,745.97, the was down 16.43 points, or 0.32%, at 5,185.96, and the was down 28.44 points, or 0.17%, at 16,225.52.
Cryptocurrency and blockchain-related stocks declined, tracking falling bitcoin prices. Exchange operator Coinbase (NASDAQ:) Global and software company MicroStrategy dipped 4.5% and 7.5%, respectively.
Moderna (NASDAQ:) shares bucked the broader trend, rising 6.9% after the vaccine maker’s individualized cancer vaccine developed with Merck showed a positive response in an early-stage trial.
Advancing issues outnumbered decliners by a 1.09-to-1 ratio on the NYSE and by a 1.16-to-1 ratio on the Nasdaq.
The S&P index recorded 12 new 52-week highs and one new low, while the Nasdaq recorded 46 new highs and 53 new lows.