Troubling First Republic Results May Weigh On Wall Street

The major U.S. index futures are currently pointing to a lower open on Tuesday, with stocks likely to move to the downside after ending the previous session narrowly mixed.

Negative sentiment may be generated in reaction to quarterly results from First Republic (FRC), with the regional bank plunging by 21.4 percent in pre-market trading.

The steep drop by First Republic comes after the company reported a loss of more than $100 billion in deposits in the first quarter, renewing concerns about turmoil in the banking sector.

Shares of UPS Inc. (UPS) may also come under pressure after the delivery giant reported weaker than expected first quarter results and forecast full-year revenue at the lower end of its prior forecast.

On the other hand, shares of General Motors (GM) are likely to see initial strength after the auto giant reported first quarter results that exceeded analyst estimates and raised its full-year guidance.

Other big-name companies like PepsiCo (PEP), McDonald’s (MCD) and 3M (MMM) may also move to the upside after reporting better than expected quarterly earnings.

Overall trading activity may remain somewhat subdued, however, as traders look ahead to quarterly results from Google parent Alphabet (GOOGL) and software giant Microsoft (MSFT) after the close of trading.

Following the lackluster performance seen last Friday, stocks continued to show a lack of direction over the course of the trading session on Monday. The major averages once again spent the day bouncing back and forth across the unchanged line.

The major averages eventually ended the day mixed. While the Nasdaq fell 35.25 points or 0.3 percent to 12,037.20, the S&P 500 inched up 3.52 points or 0.1 percent to 4,137.04 and the Dow rose 66.44 points or 0.2 percent to 33,875.40.

The choppy trading on Wall Street came as traders remained reluctant to make significant moves ahead of the release of earnings news from several big name companies in the coming days.

Tech giants Alphabet (GOOGL), Amazon (AMZN), Intel (INTC), Meta Platforms (META) and Microsoft (MSFT) are among a slew of well-known companies due to report their quarterly results this week.

“America’s S&P 500 has added $2.4 trillion in market capitalization so far in 2023 and just six stocks – Meta Platforms, Amazon, Apple, Netflix, Google’s parent Alphabet and Microsoft has provided $1.6 trillion of that gain between them, or two-thirds of the total,” says AJ Bell investment director Russ Mould.

He added, “After a lukewarm set of figures from Netflix last week, and a sharp year-on-year drop in first-quarter profits from another tech darling, Tesla, investors will be looking to five of the MAANAM sextet (or FAANGM group as they once were) to deliver good results and upbeat outlooks and help U.S. equity markets maintain the run that began last October.”

A lack of major U.S. economic data also kept some traders on the sidelines ahead of the release of several key reports.

Reports on consumer confidence, new home sales, durable goods orders, first quarter GDP and personal income and spending are likely to attract attention in the coming days.

The personal income and spending report includes a reading on inflation said to be preferred by the Federal Reserve and could impact the outlook for interest rates ahead of the Fed meeting next week.

Despite the lackluster performance by the broader markets, oil service stocks moved sharply higher, driving the Philadelphia Oil Service Index up by 2.4 percent. The rally by oil service stocks came amid a notable increase by the price of crude oil.

Oil producer, gold and natural gas stocks also moved to the upside along with the price of their associated commodities.

On the other hand, software and computer hardware stocks came under pressure, weighing on the tech-heavy Nasdaq.

Reflecting the weakness in the sectors, the Dow Jones U.S. Software Index and the NYSE Arca Computer Hardware Index both fell by 1.1 percent.

Commodity, Currency Markets

Crude oil futures are falling $0.48 to $78.28 a barrel after climbing $0.89 to $78.76 a barrel on Monday. Meanwhile, after rising $9.30 to $1,999.80 an ounce in the previous session, gold futures are slipping $8.80 to $1,991 an ounce.

On the currency front, the U.S. dollar is trading at 134.14 yen compared to the 134.24 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.1024 compared to yesterday’s $1.1046.

Asia

Asian stocks ended mostly lower in thin trading on Tuesday, with Australian and New Zealand markets closed for a public holiday.

Amid increasing anxiety about high interest rates and tightening economic conditions, investors awaited earnings from tech giants Microsoft, Amazon, Alphabet and Meta Platforms for directional cues.

Traders also awaited a slew of upcoming central bank meetings, most notably the Fed, ECB and BOE meetings due over the next two weeks.

Chinese shares ended lower as investors weighed a slew of economic and geopolitical risks. The benchmark Shanghai Composite Index dropped 0.3 percent to 3,264.87 on concerns about the sustainability of the country’s economic recovery.

Hong Kong’s Hang Seng Index tumbled 1.7 percent to 19,617.88. Alibaba Group Holdings plunged 3.2 percent and Baidu plummeted 3.7 percent.

Japanese shares finished marginally higher, after having touched an eight-month high earlier as new BOJ Governor Kazuo Ueda vowed to keep interest rates low for now but signaled the chance of rising rates if wage growth and inflation accelerate faster than expected.

Investors also digested data showing that producer prices in the country were up 1.6 percent year-on-year in March.

The Nikkei 225 Index ended marginally higher at 28,620.07, giving up early gains as caution prevailed ahead of Friday’s BOJ policy meeting. The broader Topix closed 0.2 percent higher at 2,042.15.

Electronic makers rose on optimism over expanded government subsidies for chip production, while steel producers slipped on signs of weakening Chinese demand. Nippon Steel gave up 3.8 percent and Kobe Steel shed 3 percent.

Seoul stocks fell sharply, with the Kospi average slumping 1.4 percent to 2,489.02 as data showed the country’s economy barely avoided a recession in the first quarter of 2023.

Tech stocks suffered heavy losses on concerns over a slowdown in earnings amid aggressive tightening measures by global central banks.

Samsung Electronics plunged 2.5 percent and SK Hynix lost 2 percent. Steelmaker POSCO Holdings slumped 4.8 percent on global growth worries.

Europe

European stocks have edged lower on Tuesday as investors fret about the outlook for economic growth and await earnings from U.S. heavyweights Microsoft and Google parent Alphabet later in the day.

Meanwhile, banking jitters returned to the fore after U.S. lender First Republic Bank said its deposits tumbled more than $100 billion last quarter and that it was exploring options such as restructuring its balance sheet.

While the French CAC 40 Index has slid by 0.6 percent, the U.K.’s FTSE 100 Index is down by 0.2 percent and the German DAX Index is just below the unchanged line.

UBS Group AG shares have fallen in Switzerland. The banking major reported a sharply lower profit in its first quarter due to increased U.S. litigation provision and weak revenues.

Standard Chartered have also moved to the downside after its CEO Bill Winters warned that the banking sector may face fresh issues.

Banco Santander has also moved sharply lower after reporting a drop in earnings from Brazil and outflows of deposits in Spain.

Miners Anglo American, Antofagasta and Glencore have also slid on mounting worries about the global economic outlook.

Primark owner Associated British Foods has also slumped as it reported a 3 percent decrease in first-half profits.

Meanwhile, online grocer Ocado has edged higher in choppy trading after announcing plans to stop operations at its Hatfield customer fulfillment centre this summer in a move impacting around 2,300 workers.

Premier Inn owner Whitbread has moved sharply higher after its annual profit rose above pre-pandemic levels.

Swiss food group Nestle has also moved to the upside after reporting better-than-expected first-quarter sales.

Drug maker Novartis has also risen after raising its full-year earnings outlook. Engineering firm ABB has also rallied after raising its full-year guidance for sales and profit.

Forklift manufacturer Jungheinrich AG has also jumped after reporting an increase in first quarter preliminary EBIT and lifting its full-year outlook.

Daimler Truck Holding has also advanced 2.6 percent after reporting first quarter preliminary results above expectations.

Alstom has also risen in Paris after it won a contract valued at around 900 million euros ($994.9 million) to supply trams to Quebec City, Canada.

U.S. Economic Reports

Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of February at 9 am ET.

At 10 am ET, the Commerce Department is due to release its report on new home sales in the month of March. Economists expect new home sales to dip to an annual rate of 634,000 in March from a rate of 640,000 in February.

The Conference Board is also scheduled to release its report on consumer confidence in the month of April at 10 am ET. The consumer confidence index is expected to edge down to 104.0 in April from 104.2 in March.

At 1 pm ET, the Treasury Department is due to announce the results of this month’s auction of $42 billion worth of two-year notes.

Stocks In Focus

U.S.-listed shares of Novartis (NVS) are likely to see initial strength after the Swiss drugmaker reported better than expected first quarter earnings and raised its full-year guidance.

JetBlue (JBLU) may also move to the upside after the airline reported a narrower than expected first quarter loss and forecast a “solidly profitable” second quarter.

Meanwhile, shares of Packaging Corporation of America (PKG) are likely to come under pressure after the paper products company reported weaker than expected first quarter earnings and provided disappointing second quarter guidance.