Stocks Settle Sharply Lower as Bank Stocks Plunge

What you need to know…

The S&P 500 Index ($SPX) (SPY) Thursday closed down -1.85%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.66%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.802%.

Stock indexes Thursday relinquished early gains and sold off sharply, with the S&P 500 falling to a 1-1/2 month low and the Dow Jones Industrials tumbling to a 4-month low.  Concerns about the U.S. banking sector weighed on bank stocks Thursday after Silvergate Capital plunged more than -42% after the company said it plans to wind down operations and liquidate its bank.  Also, SVB Financial plummeted by more than -60% following a stock sale to shore up its capital after being hit by losses on its securities portfolio and a slowdown in funding at the venture capital-backed companies it banks.   

A plunge in Bitcoin (^BTCUSD) by more than -7% to a 7-week low Thursday weighed on financials and other crypto-related stocks.  Cryptocurrency prices plunged after Silvergate Capital said it plans to wind down operations and liquidate its bank.  Silvergate collapsed amid scrutiny from regulators and a criminal investigation by the Justice Department's fraud unit into dealings with FTX and Alameda Research.

U.S. stock indexes Thursday morning initially moved moderately higher. A larger-than-expected increase in weekly U.S. jobless claims knocked bond yields lower and eased concerns that a hot labor market would force the Fed to keep aggressively raising interest rates.  The 10-year T-note yield fell -6.8 bp to 3.923%.

U.S. weekly initial unemployment claims rose +21,000 to a 2-1/4 month high of 211,000, showing a weaker labor market than expectations of 195,000.  Also, weekly continuing claims rose +69,000 to a 2-1/2 month high of 1.718 million, showing a weaker labor market than expectations of 1.660 million.

Negative corporate news Thursday also weighed on the overall market.  SVB Financial closed down more than -60% after the company announced the sale of $21 billion of securities, resulting in a Q1 after-tax loss of about $1.8 billion.  Also, JD.com closed down more than -11% after reporting Q4 net revenue below consensus.   In addition, Etsy closed down more than -4% after Jeffries double-downgraded the stock to underperform from buy.

On the positive side, General Electric closed up more than +5% after giving a bullish forecast for the year.  Also, BJ’s Wholesale Club Holdings closed up more than +2% after reporting stronger-than-expected Q4 revenue.  In addition, Stryker closed up more than +1% on earnings optimism after JPMorgan Chase said the company's macro trends remain strong.   

Overseas stock markets Thursday settled mixed.  The Euro Stoxx 50 closed down -0.05%.  China’s Shanghai Composite stock index closed down -0.22%, and Japan’s Nikkei Stock Index closed up +0.63%. 

Today’s stock movers…

SVB Financial (SIVB) closed down more than -60% to lead losers in the S&P 500 after the company announced the sale of $21 billion of securities, resulting in a Q1 after-tax loss of about $1.8 billion.

Bank stocks tumbled Thursday and weighed on the overall market on concerns about the fallout from rising interest rates.  First Republic Bank/Ca (FRC) closed down more than -16%, and Zions Bancorp (ZION) closed down more than -11%.  Also, Comerica (CMA) closed down more than -8%, and US Bancorp (USB) closed down more than -7%.  In addition, Wells Fargo (WFC), Bank of America (BAC), and Northern Trust (NTRS) closed down more than -6%.  Finally, JPMorgan Chase (JPM) closed down more than -5% to lead the Dow Jones Industrials losers. 

JD.com (JD) closed down more than -11% to lead losers in the Nasdaq 100 after reporting Q4 net revenue of 295.45 billion yuan, below the consensus of 295.51 billion yuan

Silvergate Capital (SI) closed down more than -42% after it said it plans to wind down its operations and liquidate its bank following turmoil in the crypto industry. 

Etsy (ETSY) closed down more than -4% after Jeffries double-downgraded the stock to underperform from buy. 

General Electric (GE) closed up more than +5% to lead gainers in the S&P 500 after CEO Culp said sales at its combined power-equipment and renewable energy units are expected to grow at a mid-single-digit rate with high single-digit profit margins this year.  Also, its aviation division should see revenue growth at a high mid- to high-single-digit rate and generate free cash flow “in line with net income” over the same period. 

BJ’s Wholesale Club Holdings (BJ) closed up more than +2% after reporting Q4 revenue of $4.93 billion, stronger than the consensus of $4.81 billion.

Phillips 66 (PSX) closed up more than +1% after UBS initiated coverage of the stock with a buy recommendation.

Stryker (SYK) closed up more than +1% on earnings optimism after JPMorgan Chase said, “macro trends around staffing and hospital capex have remained strong through Q1 so far, with the patient backlog likely to be a modest tailwind for the next six quarters.”

Dish Network (DISH) closed up +0.8% after the U.S. International Trade Commission said that Dish Network proved that Peloton Interactive and IFit Inc infringed on some of its streaming patents, which Bloomberg Intelligence said will push the companies into “inevitable” licensing deals with Dish Network by May. 

Across the markets…

June 10-year T-notes (ZNM23) on Thursday closed up +18 ticks, and the 10-year T-note yield fell by -6.8 bp to 3.923%.  T-notes Thursday rallied to a 1-week high, and the 10-year T-note yield fell to a 1-1/2 week low of 3.892%.  June 10-year T-notes Thursday moved higher after weekly U.S jobless claims rose more than expected, which eases concern the Fed will tighten monetary policy more aggressively.  Another supportive factor for T-notes was a fall in inflation expectations after the 10-year breakeven inflation rate Thursday dropped to a 1-month low of 2.296%. Gains in T-notes accelerated Thursday afternoon on increased safe-haven demand after a plunge in U.S. bank stocks sent the S&P 500 down to a 1-1/2 month low. 

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