Stocks Sink as Bank Worries Persist

What you need to know…

The S&P 500 Index ($SPX) (SPY) Tuesday closed down -1.58%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -1.02%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -1.89%.

Stock indexes Tuesday sold off, with the S&P 500 and Dow Jones Industrials falling to 2-week lows and the Nasdaq 100 dropping to a 3-1/2 week low.  A slump in regional bank stocks weighed on the overall market and bolstered concerns that the banking crisis has not run its course.  First Republic Bank plunged more than -49% to a record low after reporting greater-than-expected withdrawals in Q1.  Losses in First Republic accelerated Tuesday afternoon when Bloomberg reported the bank was exploring divesting up to $100 billion of long-dated mortgages and securities as part of a broader rescue plan.

Stocks were also undercut by concern about the risk of a Treasury default if Washington cannot agree on a debt limit increase by this summer.  Republican House leaders plan to hold a vote this week on their proposed debt limit legislation, drawing market attention to the Washington impasse.

Cybersecurity stocks retreated Tuesday after Tenable Holdings cut its full-year revenue forecast.  Finally, stock indexes extended their losses after a gauge of U.S. Apr consumer confidence fell more than expected to a 9-month low.

Lower T-note yields Tuesday were a supportive factor for stocks. The markets are showing a 75% chance of a 25 bp rate hike by the Federal Reserve at the May 2-3 FOMC meeting and have fully priced in a 25 bp rate hike by the ECB at its May 4 ECB meeting.

The U.S. Feb S&P CoreLogic composite-20 home price index unexpectedly rose +0.36% y/y versus expectations for a -0.05% y/y decline.

U.S. Mar new home sales unexpectedly rose +9.6% m/m to a 1-year high of 683,000, stronger than expectations of a decline to 632,000.

The Conference Board U.S. Apr consumer confidence index fell -2.7 to a 9-month low of 101.3, weaker than expectations of 104.0.

The U.S. Apr Richmond Fed manufacturing survey fell -5 to -10, weaker than expectations of -8.

On the bearish side for stocks, MSCI Inc closed down more than -13% after reporting Q1 operating revenue below consensus.  Also, United Parcel Service closed down more than -9% after reporting weaker-than-expected Q1 revenue and forecasting full-year revenue below consensus.  In addition, Danaher closed down more than -8% after cutting guidance on full-year non-GAAP base business core revenue growth. 

On the positive side, Brown & Brown closed up more than +3% after reporting Q1 revenue above consensus.  Also, Centene closed up more than +2% after reporting better-than-expected Q1 adjusted EPS.  In addition, Fiserv closed up more than +2% after raising its full-year organic revenue forecast.

Global bond yields moved lower.  The 10-year T-note yield fell to a 1-1/2 week low of 3.377% and finished down -9.4 bp at 3.396%.  The 10-year German bund yield dropped to a 1-week low of 2.358% and finished down -12.4 bp at 2.384%.  The 10-year UK gilt yield fell to a 1-week low of 3.663% and finished down -8.6 bp at 3.695%.

Overseas stock markets Tuesday settled mixed.  The Euro Stoxx 50 closed down -0.54%.  China’s Shanghai Composite closed down -0.32%, and Japan’s Nikkei Stock Index closed up +0.09%. 

Today’s stock movers…

First Republic Bank (FRC) closed down more than -49% to lead losers in the S&P 500 after reporting deposits at the end of Q1 were $104.47 billion, well below the consensus of $136.67 billion.  Losses accelerated after Bloomberg reported the bank was exploring divesting up to $100 billion of long-dated mortgages and securities as part of a broader rescue plan.

MSCI Inc (MSCI) closed down more than -13% after reporting Q1 operating revenue of $592.2 million, weaker than the consensus of $594.4 million.

United Parcel Service (UPS) closed down more than -9% after reporting Q1 revenue of $22.9 billion, below the consensus of $23.0 billion and forecasting full-year revenue in the lower end of $97.0 billion to $99.4 billion, weaker than the consensus of $98.08 billion.

Northern Trust (NTRS) closed down more than -9% after reporting Q1 EPS of $1.51, weaker than the consensus of $1.52.  Other regional bank stocks moved lower as well, with KeyCorp (KEY), Zions Bancorp (ZION), and Fifth Third Bancorp (FITB) closing down more than -5%. Also, Comerica (CMA) and Truist Financial (TFC) closed down more than -4%.

Danaher (DHR) closed down more than -8% after cutting guidance on full-year non-GAAP base business core revenue growth to up mid-single digits year-over-year from a prior forecast of core revenue up high-single digits. 

GE Healthcare (GEHC) closed down more than -8% after forecasting full-year adjusted EPS of $3.60-$3.75, the midpoint below the consensus of $3.72. 

Dow Inc (DOW) closed down more than -5% to lead losers in the Dow Jones Industrials after reporting Q1 net sales fell -22% y/y to $11.85 billion and saying net sales contraction reflects declines in all operating segments driven by slower global macroeconomic activity.

Cybersecurity stocks sold off Tuesday, with Tenable Holdings (TENB) plunging more than -19% after cutting its full-year revenue forecast to $775 million-$785 million from an earlier forecast of $800 million-$810 million, weaker than the consensus of $805.4 million.  As a result, Zscaler (ZS) closed down more than -8% to lead losers in the Nasdaq 100.  Also, CyberArk Software (CYBR) closed down more than -10%, and Crowdstrike Holdings (CRWD) closed down more than -6%. In addition, SentinelOne (S) closed down by more than -5%, and Palo Alto Networks (PANW), Fortinet (FTNT), and Okta (OKTA) closed down by more than -4%. 

Brown & Brown (BRO) closed up more than +3% to lead gainers in the S&P 500 after reporting Q1 revenue of $1.12 billion, stronger than the consensus of $1.07 billion.

Centene (CNC) closed up more than +2% after reporting Q1 adjusted EPS of $2.11, better than the consensus of $2.00, and raised guidance on full-year adjusted EPS to at least $6.40 from a prior view of $6.25 to $6.40.

Fiserv (FISV) closed up more than +2% to lead gainers in the Nasdaq 100 after raising its full-year organic revenue forecast to +8% to +9% from +7% to +9%, stronger than the consensus of +7.8%.

PepsiCo (PEP) closed up more than +2% after raising its full-year core EPS estimate to $7.27 from a prior estimate of $7.20, above the consensus of $7.24.

Moody’s (MCO) closed up more than +1% after reporting Q1 adjusted EPS of $2.99, well above the consensus of $2.24.

Kimberly Clark (KMB) closed up more than +1% after reporting Q1 organic sales rose +5.0%, stronger than the consensus of +3.8%.

Across the markets…

June 10-year T-notes (ZNM23) on Tuesday closed up +29.5 ticks, and the 10-year T-note yield fell by -9.4 bp to 3.396%.  June T-notes Tuesday rallied to a 1-1/2 week high, and the 10-year T-note yield fell to a 1-1/2 week low of 3.377%.  A slump in stocks Tuesday boosted the safe-haven demand for T-notes.  Also, a decline in inflation expectations was bullish for T-notes after the 10-year breakeven inflation rate dropped to a 1-1/2 week low Tuesday at 3.225%.

T-notes raced to their highs Tuesday afternoon on strong demand for the Treasury’s $42 billion 2-year T-note auction with a bid-to-cover ratio of 2.68, above the 10-auction average of 2.59. 

• Spotify’s Q1 2023 Earnings Pushes Volume Through the Roof. Is It a Buy?
• Shocking News From Fox Corp (FOXA) Sparks Unusual Stock Options Volume
• Meta Platforms Needs Fresh Impetus to Extend Rally
• Despite a Dividend Hike, Ameriprise Stock Drops, Giving Value Investors a Buying Opportunity