In a turbulent turn of events, the U.S. stock market faced significant pressure as all three major indexes closed in the red, with the Nasdaq Composite plunging a staggering 2.04%. This decline comes just before the eagerly anticipated Federal Reserve's interest rate decision. Economic indicators released earlier pointed towards rising inflation and a shrinking manufacturing sector, raising fears of stagflation in the U.S. economy. Investors anxiously awaited earnings reports from leading tech firms and the release of April’s non-farm payroll data, crucial for understanding the employment landscape.

As the trading session concluded, the Dow Jones Industrial Average fell by 570.17 points, accounting for a 1.49% drop, settling at 37,815.92 points. The S&P 500 index experienced a 1.57% decline, closing at 5,035.69 points, while the Nasdaq saw a drop of 325.26 points, equating to a 2.04% fall, ultimately ending at 15,657.82 points. Notably, all eleven sectors of the S&P 500 index recorded declines, with the energy sector and consumer discretionary sector leading the losses at 2.89% and 2.66%, respectively. In contrast, the health care sector saw the smallest pullback at just 0.11%.

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April concluded with all three indexes witnessing over a 4% drop, breaking a five-month streak of gains. Specifically, the Dow dropped by 5.01%, the S&P 500 fell by 4.16%, and the Nasdaq shed 4.41%. This marked the largest monthly declines for the S&P 500 and Nasdaq since September 2023 and was the most significant drop for the Dow since September 2022.

Post-market reports revealed a different narrative with Amazon announcing impressive first-quarter earnings for 2024, driven by a surge in demand for artificial intelligence services. Amazon Web Services (AWS) achieved a remarkable 17% year-over-year increase in sales, leading to a 2.4% increase in Amazon’s stock price in after-hours trading. The company reported a revenue increase of 13% to $143.3 billion, surpassing analyst expectations of $142.6 billion, with an operating profit of $15.3 billion, far exceeding predictions of around $11 billion. AWS alone generated $25 billion in revenue, while the division reported an operating profit margin of 37.6%, marking the highest performance since the company began reporting cloud sales.

According to CEO Andy Jassy, this success was attributed to ongoing infrastructure modernization along with the growing attraction of AWS's artificial intelligence capabilities. In contrast, economic data released earlier showed a decline in consumer confidence, mirrored by the Conference Board’s Consumer Confidence Index (CCI), which fell to 97 in April, the lowest since July 2022. This downward trend followed a revised March figure of 103.1. Manufacturing activity in the Chicago area also contracted, with the Purchasing Managers' Index (PMI) hitting 37.9, the lowest since November 2022. Labor cost indexes indicated that labor costs rose by 1.2% in the first quarter, the largest increase in a year, surpassing market expectations.

Analysts expressed that these figures signify an increased risk of stagflation, with rising concerns that the Federal Reserve may cut back on interest rate reductions this year, possibly even refraining from cuts altogether. Phil Flynn, a senior market analyst at Price Futures Group, shared insights pointing to traders increasingly factoring in the risk of further rate hikes rather than merely maintaining the current rates.

In stark contrast, Standard Chartered analysts anticipated that the current stagnation in anti-inflationary processes is merely a temporary phenomenon. They believe that the market corrections seen in stock values and the uptick in bond yields could present opportunities for diversifying investments. Thomas McGarty, head of equities at RBC Wealth Management, acknowledged that while corporate earnings and guidance appear relatively positive, they are overshadowed by persistent concerns regarding sticky inflation and rising Treasury yields.

Commencing from Tuesday, the Federal Reserve began a two-day meeting regarding monetary policy, where it is expected to maintain the federal funds interest rate within the range of 5.25% to 5.5%. Investors are particularly focused on Fed Chair Jerome Powell's insights regarding interest rate trajectories for the forthcoming months.

As far as individual stocks are concerned, Tesla saw its share price drop by 5.55% after announcing the exit of two executives and plans for additional layoffs. Conversely, Eli Lilly's stock surged by 5.95%, buoyed by first-quarter revenues of $8.768 billion, reflecting a 26% increase year-over-year, alongside an upward adjustment of its annual guidance, driven by robust sales of its diabetes drug Mounjaro and newly launched weight-loss medication Zepbound. McDonald's dipped by 0.19%, attributed to a slowdown in U.S. market growth and the impact of the ongoing Israel-Palestine conflict, resulting in a first-quarter performance that fell below expectations. Additionally, Paramount Global's shares slumped by 7.18% following the announcement of CEO Bob Bakish's departure amid acquisition talks with Skydance Media, which has recently made an offer valuing the deal at approximately $5 billion.

3M’s stock rose by 4.72% after reporting first-quarter results that exceeded analyst expectations, indicating an anticipated dividend payout ratio of around 40% of its adjusted free cash flow. PayPal saw a 1.39% increase, reporting a 14% year-over-year rise in total payment volume to $403.9 billion, outperforming analyst forecasts. NXP Semiconductor stocks climbed by 3.67%, buoyed by second-quarter revenue and adjusted earnings guidance exceeding the market’s expectations.

According to data from the London Stock Exchange Group (LSEG) as of Monday, over half of the S&P 500 companies had reported first-quarter earnings, with overall profits surpassing analyst expectations by 9.5 percentage points. Furthermore, forecasted earnings growth for 2024 has been revised upwards to 10%, showcasing the strong fundamentals of publicly listed companies.

In the commodities sector, oil prices continued their decline from earlier in the week, with West Texas Intermediate (WTI) crude futures for June delivery dropping by 70 cents, or 0.85%, to settle at $81.93 per barrel. The U.S. Energy Information Administration (EIA) reported that U.S. oil production surged from 12.58 million barrels per day in January to 13.15 million barrels per day in February, marking the largest monthly increase since October 2021. Exports also saw a notable rise, increasing from 4.05 million barrels per day in January to 4.66 million barrels per day in February.

Gold futures closed down by 2.3%, settling at $2,302.90 per ounce, reflective of a broader trend in the commodities market.