Mixed Earnings Reports and Deposit Drop at First Republic Bank Spark Investor Concerns: US Stock Market Opens Lower on Tuesday

Major U.S. stock indexes opened lower on Tuesday (25th) after U.S. companies announced a series of mixed earnings reports, while a sharp drop in deposits at regional bank First Republic Bank sparked investor concerns about the banking sector. Shares plunged nearly 29% in early trade.

before the deadline,Dow Jones Industrial Averagefell nearly 50 points or 0.14%,Nasdaq Composite Indexfell more than 80 points or nearly 0.7%,S&P 500 Indexfell nearly 0.6%,Philadelphia SemiconductorThe index fell more than 1%.

Major futures indexes fell along with European shares ahead of the U.S. open as investors scrutinized a slew of corporate earnings reports for clues about the outlook for corporate profits amid high interest rates and slowing economic growth.

Bank of America data shows that the past two weeks have exceeded expectationsS&P 500 IndexComponent companies outperformed the index by an average of 2 percent and above the historical average of 1.5 percent, while underperformers only underperformedS&P 500 IndexAbout 0.9%.

Some optimistic bulls in the U.S. stock market may have begun to prepare for an optimistic profit trend. Analysts generally predict that the trend of shrinking profit margins from the end of 2022 will end around the second half of this year, and the double-digit growth trend is expected to resume next year.

Markets now expect U.S. interest rates to peak in June before falling back below 4.5% by the end of the year. Data released yesterday showed that the U.S. manufacturing sector performed worse than economists had expected, while uncertainty surrounding the debt ceiling remained. Preliminary data on U.S. gross domestic product (GDP) for the first quarter due later this week will likely point to a slowdown in economic growth, while the Fed’s preferred core personal consumption expenditures (PCE) index will see slower growth.

In other news, heightened fears that the U.S. Treasury Department could hit the debt ceiling “Day X” in the coming months have led many investors to shun certain short-dated T-bills in favor of other, safer maturities. , which led directly to record distortions in the short-term Treasury curve over the past week.

The spread between 1-month and 3-month Treasury yields has recently widened to a record level since the 1-month bill was introduced in 2001. Analysts estimate that the Treasury will most likely run out of funds in July or August.

As of 21:00 on Tuesday (25th) Taipei time:

Focus stocks:

Tesla (TSLA-US) fell 1.66 percent in early trade to $159.85 a share

American electric vehicle manufacturer Tesla announced on Tuesday that it will officially open charging stations in China to some non-Tesla brand new energy vehicle owners, further implementing the “Charging Network Open Pilot Project”. It is understood that Tesla’s first pilot charging stations include 10 super charging stations, 120 destination charging stations, and cover 37 models. These 10 Tesla super charging stations are distributed in Beijing and Shanghai’s business office areas, shopping centers and other new energy car owners gathering areas. Car owners who want to participate in the event can experience this service through the Tesla App (App).

UBS (UBS-US) fell 1.61% in early trade to $20.23 per share

UBS’ net interest income in the first quarter was US$1.39 billion, down 22% year-on-year; net profit was US$1.03 billion, down 52% year-on-year, lower than market expectations of US$1.86 billion. In addition, UBS’s acquisition of Credit Suisse is likely to be completed in the second quarter of this year.

First Republic Bank of America (FRC-US) fell 29.97% in early trade to $11.21 per share

First Republic Bank of the United States plunged more than 22% to $ 12.48 per share before the market. Earlier, the bank’s financial report showed that deposits fell by nearly $72 billion in the first quarter, a drop of 41%. Customers pulled money from the bank amid a crisis that led to the collapse of three other regional U.S. banks. The bank also had $104.5 billion in deposits at the end of the first quarter, including $30 billion in deposits from big U.S. banks last month, a lifeline for the bank.

Today’s key economic data:

• The revised monthly rate of building permits in the United States in March reported -7.7%, expected -8.8%, and the previous value was 15.8%
• U.S. February FHFA house price index reported an annual rate of 7.0%, expected 3.9%, and the previous value of 5.3%
• The US February FHFA house price index reported a monthly rate of 0.5%, expected – 0.1%, and the previous value of 0.1%
• U.S. Economic Review Council Consumer Confidence Index in April is expected to be 104.2, the previous value was 104.2
• The annualized monthly growth rate of new home sales in the United States in March is expected to be 1.1%, the previous value was 1.1%
• The annualized total of new home sales in the United States in March is expected to be 635,000, compared with the previous value of 640,000

Wall Street Analysis:

Ann-Katrin Petersen, senior investment strategist at BlackRock Investment Research Institute, said that the most important key to the outlook for technology stocks is interest rate expectations. The market currently expects the Fed to cut interest rates quickly in the second half of this year, but we disagree with this. The technology industry is very sensitive to interest rates, so the industry may have already priced in the possibility of a reversal in the Fed’s interest rate expectations in the second half of this year.

Bank of America’s strategist team led by Savita Subramanian believes that the market’s recent expectations of Fed rate cuts and cost reductions by various companies indicate that the US stock market may be stronger next year, coupled with the possibility of fiscal stimulus next year. Bank of America believes that U.S. stocks performed better than expected in this quarter’s earnings season, which is a good sign of continued earnings growth, and that a large number of macro headwinds currently facing companies may dissipate next year.