Stocks Tumble as Liquidity Concerns Rout Regional Bank Stocks

What you need to know…

The S&P 500 Index ($SPX) (SPY) Thursday closed down -0.72%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.86%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -0.37%.

Stock indexes Thursday closed moderately lower, with the S&P 500 and Dow Jones Industrials falling to 5-week lows and the Nasdaq 100 dropping to a 1-week low.  Concern about the health of the U.S. banking system hammered regional bank stocks Thursday and weighed on the overall market. PacWest Bancorp plunged -50%, and Western Alliance Bancorp plummeted more than -38% to record lows when they said they were considering strategic options, including a sale.  Also, First Horizon Corp sank more than -33% after it said it terminated its agreement to merge with TD Bank.

U.S. stocks also fell Thursday on negative carryover from a fall in European stocks after the ECB raised interest rates and maintained a hawkish tone.  Stocks maintained moderate losses after Thursday’s U.S. economic news showed Q1 nonfarm productivity fell more than expected, and Q1 unit labor costs rose more than expected.

Also weighing on stocks is the lack of clarity regarding the U.S. debt ceiling.  Treasury Secretary Yellen Monday said the Treasury Department may run out of cash to pay its bills as soon as June 1 unless the debt ceiling is raised.

U.S. weekly initial unemployment claims rose +13,000 to 242,000, showing a weaker labor market than expectations of 240,000.  However, weekly continuing claims unexpectedly fell -38,000 to 1.805 million, showing a stronger labor market than expectations of an increase to 1.865 million. 

U.S. Q1 nonfarm productivity fell -2.7%, weaker than expectations of -2.0%.  Also, Q1 unit labor costs rose +6.3%, stronger than expectations of +5.6%.

The U.S. Mar trade deficit narrowed to -$64.2 billion from -$70.6 billion in Feb, wider than expectations of -$63.1 billion.

Global bond yields were mixed.  The 10-year T-note yield fell to a 4-week low of 3.293% but recovered and rose +2.8 bp to 3.364%.  The 10-year German bund yield fell to a 4-week low of 2.178% and finished down -5.7 bp at 2.190%, and the UK 10-year gilt fell -4.3 bp at 3.653%.

On the bearish side for stocks, regional bank stocks sold off on liquidity concerns as sentiment remains negative in the sector.  Also, Paramount Global closed down more than -28% after reporting an unexpected Q1 adjusted loss per share.  Qualcomm closed down more than -5% after forecasting weaker-than-expected Q3 revenue. 

On the bullish side, Ball Corp closed up more than +13% after reporting Q1 comparable EPS above consensus.  Also, Datadog closed up more than +14% after reporting Q1 revenue above consensus and raising guidance on full-year revenue.  In addition, FleetCor Technologies closed up more than +7% after reporting better-than-expected Q1 revenue.

Overseas stock markets Thursday settled mixed.  The Euro Stoxx 50 closed down -0.54%.  China’s Shanghai Composite closed up +0.82%, and Japan’s Nikkei Stock Index was closed for Greenery Day. 

Today’s stock movers…

Regional bank stocks sold off Thursday on concern about the health of the U.S. banking system.  PacWest Bancorp (PACW) closed down more than -50%, and Western Alliance Bancorp (WAL) closed down more than -38% on concerns the lenders are facing liquidity troubles.  Also, First Horizon Corp (FHN) closed down more than -33% after it said it terminated its agreement to merge with TD Bank.  Other regional bank stocks retreated as well, with Comerica (CMA) and Zions Bancorp (ZION) closing down more than -12%, and KeyCorp (KEY), Citizens Financial Group (CFG), Truist Financial (TFC), Huntington Bancshares (HBAN), and US Bancorp (USB) closing down more than -6%. 

Paramount Global (PARA) closed down more than -27% to lead losers in the S&P 500 after reporting an unexpected Q1 adjusted loss per share of -$1.81 versus the consensus for a profit of +14 cents.  The company also cut its quarterly cash dividend to 5 cents a share from 24 cents. 

Mosaic (MOS) closed down more than -9% after reporting Q1 adjusted Ebitda of $777 million, weaker than the consensus of $801.3 million.

Organon & Cos (OGN) closed down more than -9% after reporting Q1 adjusted EPS continuing operations of $1.08, below the consensus of $1.16.

BorgWarner (BWA) closed down more than -7% after reporting Q1 adjusted EPS of $1.09, weaker than the consensus of $1.11n.

 

MetLife (MET) closed down more than -7% after reporting Q1 adjusted EPS of $1.52, weaker than the consensus of $1.81.

Regeneron Pharmaceuticals (REGN) closed down more than -6% to lead losers in the Nasdaq 100 after reporting Q1 Eylea net product sales of $2.28 billion, weaker than the consensus of $2.41 billion.

Qualcomm (QCOM) closed down more than -5% after forecasting Q3 revenue of $8.1 billion-$8.9 billion, weaker than the consensus of $9.25 billion.

Ball Corp (BALL) closed up more than +13% to lead gainers in the S&P 500 after reporting Q1 comparable EPS of 69 cents, better than the consensus of 50 cents.

Datadog (DDOG) closed up more than +14% to lead gainers in the Nasdaq 100 after reporting Q1 revenue of $481.7 million, above the consensus of $468.9 million, and raised guidance on full-year revenue to $2.08 billion-$2.10 billion from a prior view of $2.07 billion-$2.09 billion, stronger than the consensus of $2.08 billion. 

FleetCor Technologies (FLT) closed up more than +7% after reporting Q1 revenue of $901.3 million, stronger than the consensus of $881.6 million. 

Royal Caribbean Cruises Ltd (RCL) closed up more than +7% after reporting Q1 revenue of $2.89 billion, better than the consensus of $2.82 billion, and raising guidance on full-year adjusted EPS to $4.40-$4.80 from a prior view of $3.00-$3.60. 

Vulcan Materials (VMC) closed up more than +7% after reporting Q1 adjusted EPS continuing operations of 95 cents, well above the consensus of 63 cents. 

Host Hotels & Resorts International (HST) closed up more than +6% after reporting Q1 AFFO/share of 55 cents, better than the consensus of 46 cents and forecasting full-year capex of $600 million-$725 million, the midpoint above the consensus of $608.9 million.

Cognizant Technology Solutions (CTSH) closed up more than +6% after reporting Q1 revenue of $4.81 billion, stronger than the consensus of $4.73 billion, and forecasting Q2 revenue of $4.83 billion-$4.88 billion, with the midpoint above the consensus of $4.85 billion.

Martin Marietta Materials (MLM) closed up more than +6% after reporting Q1 revenue of $1.35 billion, above the consensus of $1.27 billion.

Across the markets…

June 10-year T-notes (ZNM23) on Thursday closed up +21 ticks, and the 10-year T-note yield rose by +2.8 bp to 3.364%.  June T-notes Thursday recovered from early losses and rallied to a 4-week high, and the 10-year T-note yield fell to a 4-week low of 3.293%.  Concerns about the U.S. banking system's health have sparked a surge in safe-haven demand for T-notes.  Also, a slide in stocks Thursday boosted safe-haven demand for T-notes.  T-note prices Thursday morning initially moved lower on inflation concerns after U.S. Q1 nonfarm productivity fell more than expected and Q1 unit labor costs rose more than expected.

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