* Amazon set to report results after the bell

* Eli Lilly jumps after raising annual profit forecast

* McDonald's gains despite rare profit miss

* Indexes down: Dow 0.95%, S&P 0.82%, Nasdaq 1.04%

NEW YORK, April 30 (Reuters) - U.S. stocks traded lower on Tuesday as markets weighed economic data showing rising labor costs and deteriorating consumer confidence on the eve of a key Federal Reserve policy meeting to decide the direction of interest rates.

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

The reports came a day before the Federal Reserve Open Market Committee (FOMC) begins its two-day meeting, with investors widely expecting the central bank to leave interest rates unchanged.

Ten out of the 11 S&P 500 sectors were trading lower, led by stocks in energy, consumer discretionary, materials, industrials and technology sectors. Equities in utilities and healthcare sectors were making gains after paring early session losses.

Most Magnificent Seven stocks were also declining. Tesla down 5%, Alphabet fell 1.1%, Nvidia shed 1%, Microsoft lost 1.6%, and Amazon dropped 0.6%.

"We're still in an environment where the knee-jerk reaction is to extrapolate any warmer data into firmer inflation and more hawkish reaction from the Fed," said Garrett Melson, portfolio strategist at Natixis Investment Managers in Boston.

"But nothing has changed: growth is still strong, labor markets are holding up, and ultimately we're taking a little bit of breather in the disinflation process," Melson added.

Money markets are 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.

At 02:16 p.m. the Dow Jones Industrial Average fell 365.34 points, or 0.95%, to 38,020.75, the S&P 500 lost 41.94 points, or 0.82%, to 5,074.23 and the Nasdaq Composite lost 165.79 points, or 1.04%, to 15,817.29.

Shares of GE HealthCare shrank 13.3% after its first-quarter revenue missed analyst estimates, 3M gained 3.3% after posting a better-than-expected quarterly profit.

Drugmaker Eli Lilly jumped 6% after it raised its full-year profit forecast. PayPal rose 2% after raising its full-year adjusted profit forecast.

McDonald's rebounded from early losses and was up 0.1% after it missed quarterly profit estimates for the first time in two years.

Of the 265 companies in the S&P 500 that have reported earnings to date for the first quarter, 79.2% have beat analyst estimates, compared with the long-term average of 67%, according to LSEG I/B/E/S data. Declining issues outnumbered advancers by a 3.76-to-1 ratio on the NYSE. On the Nasdaq, 1,225 stocks rose and 2,880 fell as declining issues outnumbered advancers by a 2.35-to-1 ratio.

The S&P 500 posted 18 new 52-week highs and 6 new lows while the Nasdaq recorded 45 new highs and 99 new lows.

(Reporting by Chibuike Oguh in New York; additional reporting by Shristi Achar A and Shashwat Chauhan in Bengaluru; Editing by Aurora Ellis)