Wall Street edges lower on Fed nerves, Apple limits loss

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(Reuters) – U.S. stocks fell on Wednesday as caution set in ahead of the Federal Reserve’s regular policy statement, while strong results from Apple kept losses in check.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 1, 2018. REUTERS/Brendan McDermid

Expectations the U.S. central bank will sound more hawkish on policy tightening kept investors wary of big market moves, especially after currency markets were roiled this week by the dollar’s surge to 3-1/2-month highs against a basket of currencies.

The U.S. two-year Treasury yields US2YT=RR, most sensitive to monetary policy, hit a 9-1/2-year high after data showed U.S. private-sector payrolls for April came roughly in line with market forecasts, cementing expectations for a rate increase in June.

Despite U.S. companies being on track to post their strongest quarterly profit growth in seven years, worries about inflation and rising raw material costs have weighed on investors’ minds.

Cleaning products maker Clorox (CLX.N) was the latest firm to warn its gross margins were affected by higher commodity and logistics costs.

Apple (AAPL.O) was a bright spot, rising 4 percent after it posted resilient iPhone sales in the face of waning global demand and promised $100 billion in additional stock buybacks.

Its suppliers Cirrus Logic (CRUS.O), Lumentum Holdings (LITE.O) and Skyworks Solutions (SWKS.O) were all up between 2.5 percent and 10 percent.

Mastercard (MA.N) rose 2.8 percent after the company reported a better-than-expected quarterly profit, boosted by higher consumer spending on credit and debit cards.

The gains kept the S&P technology index .SPLRCT in the positive territory, up 0.41 percent.

At 9:58 a.m. ET, the Dow Jones Industrial Average .DJI was down 78.36 points, or 0.33 percent, at 24,020.69, the S&P 500 .SPX was down 9.13 points, or 0.34 percent, at 2,645.67 and the Nasdaq Composite .IXIC was down 1.38 points, or 0.02 percent, at 7,129.33. Recent data showed inflation hit the Fed’s 2-percent target, while another set of data showed commodity prices have been rising in the wake of the Trump administration’s tariffs on steel and aluminum imports.

“Our colleagues expect the Committee to upgrade the inflation language to note that inflation has risen and is near their 2 percent objective,” Deutsche Bank strategist Jim Reid wrote in a note to clients.

“They could also note that market-based measures of inflation compensation have risen further in recent months.” Traders have priced in a 94.3 percent chance that the Fed will raise rates a quarter percentage point in June, according to the CME Group’s Fedwatch tool.

Data showed U.S. private payrolls rose 204,000 in April, beating expectations by 4,000, but notched their smallest increase since November. The data comes ahead of the more comprehensive U.S. non-farm payrolls report on Friday. Among decliners was Snap (SNAP.N), whose shares plunged more than 21.4 percent after the Snapchat owner fell short of Wall Street forecasts for revenue and regular users.

Declining issues outnumbered advancers for a 1.24-to-1 ratio on the NYSE and for a 1.03-to-1 ratio on the Nasdaq.

The S&P index recorded five new 52-week highs and 13 new lows, while the Nasdaq recorded 34 new highs and 18 new lows.

Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta

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