Wall Street Braces For Federal Reserve’s Policy Decision Amid Mixed Economic Signals

U.S. stocks ended lower on Tuesday as investors grappled with mixed economic signals ahead of the Federal Reserve’s closely watched policy meeting. The central bank’s two-day meeting, which concludes on Wednesday comes amid rising labor costs and deteriorating consumer confidence.

Data released on Tuesday showed that U.S. labor costs rose by a more-than-expected 1.2% last quarter, indicating an uptick in wage pressures. Meanwhile, a survey found that U.S. consumer confidence worsened in April, dropping to its lowest level in more than 1-1/2 years.

The conflicting economic indicators have left investors uncertain about the Federal Reserve’s future course of action. While most expect the central bank to leave interest rates unchanged at the conclusion of its meeting, the recent data has raised questions about the timing and pace of future rate cuts.

Money markets are currently pricing in just about 31 basis points (bps) of rate cuts this year down from about 150 bps estimated at the start of 2024 according to LSEG data. The shift in expectations highlights the challenges faced by the Federal Reserve as it seeks to balance the need to control inflation with the desire to support economic growth.

The uncertainty surrounding the Fed’s policy decision weighed on Wall Street with the S&P 500 Nasdaq Composite and Dow Jones Industrial Average all ending the day lower.

As investors await the outcome of the Federal Reserve’s meeting, the market’s reaction to the central bank’s decision and any accompanying commentary will be closely watched.