Stocks Settle Mixed as Bank Stocks Tumble and Mega-Cap Tech Stocks Climb

What you need to know…

The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.70%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.87%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.42%.

Stock indexes Wednesday settled mixed, with the Dow Jones Industrials falling to a 4-1/2 month low on fresh turmoil in the banking sector.  A selloff in European bank stocks Wednesday pressured U.S. bank stocks and weakened market sentiment after Credit Suisse AG plunged to a record low when its top shareholder ruled out any additional assistance for the bank. However, stock indexes recovered from their worst levels after the Swiss National Bank said Credit Suisse would receive a liquidity backstop if needed.

The plunge in U.S. government bond yields Wednesday boosted mega-cap technology stocks and pushed the Nasdaq 100 into positive territory.

European and U.S. equities fell sharply early Wednesday on liquidity concerns for European banks after Credit Suisse Group AG sank -25% to a record low when the Chairman of Saudi National Bank, Credit Suisse AG’s top shareholder, ruled out any additional assistance for the bank if it needed additional liquidity.

Global bond yields plunged Wednesday amid fresh banking turmoil and reduced expectations of central bank rate hikes.  As a result, the 10-year T-note yield today sank to a 5-week of 3.380%.  Also, the 10-year German bund yield dropped to a 5-week low of 2.110%, and the 10-year UK gilt yield tumbled to a 1-month low of 3.251%.  Market expectations are for the ECB to raise rates by only 25 bp Thursday instead of 50 bp due to the banking turmoil.  Also, the market has priced in a less than 50% chance the Fed will raise rates by 25 bp at next week’s FOMC meeting.

U.S. stocks found support from an easing of producer price pressures after Wednesday’s news showed Feb PPI final demand fell -0.1% m/m and rose +4.6% y/y, weaker than expectations of +0.3% m/m and +5.4% y/y with the +4.6% y/y gain the slowest year-on-year increase in nearly two years. Also, Feb PPI ex-food and energy was unch m/m and rose +4.4% y/y, weaker than expectations of +0.4% m/m and +5.2% y/y, with the +4.4% y/y gain the slowest year-on-year increase in nearly two years.

Other U.S. economic news Wednesday was mixed for stocks.  On the negative side, the Mar Empire manufacturing survey of general business conditions fell to -18.8 to -24.6, weaker than expectations of -7.9.  Also, Feb retail sales fell -0.4% m/m, right on expectations.  Conversely, Jan business inventories unexpectedly fell -0.1% m/m versus expectations of no change, which supports the economy as the drop in inventories may spark an increase in production as companies replenish depleted supplies.  Also, the Mar NAHB housing market index unexpectedly rose +2 to a 6-month high of 44, stronger than expectations of a decline to 40.

Overseas stock markets Wednesday settled mixed.  The Euro Stoxx 50 closed down sharply by  -3.57%.  China’s Shanghai Composite stock index closed up +0.55%, and Japan’s Nikkei Stock Index closed up +0.03%. 

Today’s stock movers…

First Republic Bank (FRC) closed down more than -21% to lead losers in the S&P 500 after S&P Global Ratings cut the company’s debt rating to a junk score of BB+ from A- on elevated risk of deposit outflows. 

Bank stocks retreated Wednesday on fresh concerns about the sector after Credit Suisse Group AG plunged to a record low when the bank’s biggest shareholder ruled out any additional assistance for the bank.  Regions Financial (RF) closed down more than -6%.  Also, Morgan Stanley (MS), US Bancorp (USB), Synchrony Financial (SYF), Citigroup (C), and Principle Financial Group (PFG) closed down more than -5%.  In addition, JPMorgan Chase (JPM) closed down more than -4% to lead losers in the Dow Jones Industrials.

Energy stocks and service providers sold off sharply, with WTI crude prices falling more than -5% to a 15-month low.  Haliburton (HAL) closed down more than -9%.  Also, Marathon Oil (MRO), Schlumberger (SLB), and Devon Energy (DVN) closed down more than -8%.  In addition, Diamondback Energy (FANG) closed down more than -7% to lead losers in the Nasdaq 100. Finally, Hess Corp (HES) and ConocoPhillips (COP) closed down more than -6%.

Charles Schwab (SCHW) closed up more than +5% to lead gainers in the S&P 500 after Credit Suisse Group AG upgraded the stock to outperform from neutral.

A sharp decline in bond yields Wednesday gave mega-cap technology stocks a boost.  Alphabet (GOOGL) closed up more than +2%.  Also, Meta Platforms (META), Microsoft (MSFT), and Amazon.com (AMZN) closed up more than +1%.

Comerica (CMA) closed up more than +3% after UBS initiated coverage of the stock with a buy recommendation and a price target of $68. 

Netflix (NFLX) closed up +3% after CFRA upgraded the stock to strong buy from buy. 

Boston Properties (BXP) closed up more than +2% on signs of insider buying after an SEC filing showed board member Lustig bought $529,200 of his company’s stock on Wednesday. 

Jack Henry & Associates (JKHY) closed up more than +2% after UBS raised its recommendation on the stock to buy with a price target of $184.

Across the markets…

June 10-year T-notes (ZNM23) on Wednesday closed up +1-8.5/32 points, and the 10-year T-note yield fell by -21.7 bp to 3.471%.  June 10-year T-notes Wednesday rallied to a 5-week high, and the 10-year T-note yield sank to a 5-week low of 3.380%.  Fresh turmoil in the banking sector sent stocks plunging Wednesday and boosted safe-haven demand for T-notes after Credit Suisse Group AG sank to a record low on liquidity concerns. 

T-notes also garnered support Wednesday from weaker-than-expected U.S. economic reports on Feb PPI and the March Empire manufacturing survey of general business conditions.  Finally, a plunge in European government bond yields underpinned T-note prices after the 10-year German bund yield dropped to a 5-week low of 2.110%.

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