Wall Street Falls as Weak Earnings Fan Fears of Economic Slowdown

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., April 14, 2023. REUTERS/Brendan McDermid
April 25, 2023

(Reuters)—U.S. stocks sank on Tuesday as a downbeat UPS forecast exacerbated investor concerns about a slowing U.S. economy, while a plunge in regional First Republic Bank's deposits added to jitters about the health of the banking sector.

United Parcel Service Inc shares fell 9.8%, on track for their biggest one-day drop in more than eight years after the courier company forecast full-year revenue at the lower end of its earlier outlook as it navigates a weakening economy.

This helped push the Dow Jones Transport Average index down 3.6% and UPS rival FedEx Corp lost 3%.

This added to worries for investors waiting for quarterly results from megacap technology companies including Microsoft Corp. Also of concern was data showing U.S. consumer confidence fell to a nine-month low in April.

"Investors have been trying valiantly to hold it together in the midst of a big earnings and economic data week and a big Federal Reserve week next week," said Carol Schleif, chief investment officer for BMO Family Office based in Chicago.

Traders largely expect the central bank to hike rates by 25 basis points on Wednesday after its Federal Open Market Committee meeting.

Investors are "trying to parse every piece of data this week for its influence" on the path for interest rates, Schleif noted.

The KBW Regional Banking index dropped 3.4%, while the broader S&P 500 bank index fell 2.4% as First Republic shares tanked 41%, hitting a record low.

The beleaguered lender reported a more than $100 billion flight in deposits in the first quarter following the biggest banking crisis since 2008 last month.

"People are trying to figure out the health of the regional banks in general. Is there a canary in the coal mine? It's really important for mid-size businesses in the country that the regional banks to stay healthy," said Schleif.

The Dow Jones Industrial Average fell 320.58 points, or 0.95%, to 33,554.82; the S&P 500 lost 57.86 points, or 1.40%, at 4,079.18; and the Nasdaq Composite dropped 203.41 points, or 1.69%, to 11,833.80.

Of the S&P 500's 11 major industry sectors, materials was the weakest, down 2%, followed closely by consumer discretionary and industrials, both down around 1.8%.

General Motors Co reversed early gains to fall 3.8% after the automaker cautioned that price gains over 2022 will not last as the year goes on, even as it lifted its full-year profit and cash flow forecasts.

On the bright side, PepsiCo Inc shares rose 2% after it raised its annual revenue and profit forecasts, helping consumer staples stocks outperform.

While estimates for first-quarter S&P 500 earnings have narrowed to a 3.9% decline from expectations for a 5.1% decline at the start of April, according to data gathered by Refinitiv, some of the biggest companies have yet to report results.

Shares in Alphabet Inc were down 1% and Microsoft slipped 1.8% ahead of their results due after the market close.

Three-month Treasury yields jumped while longer-duration yields fell as investors balanced worries about the U.S. debt ceiling with rising concerns about the regional banking sector and the possibility of an imminent recession. [US/]

Declining issues outnumbered advancers on the NYSE by a 4.78-to-1 ratio; on Nasdaq, a 3.39-to-1 ratio favored decliners.

The S&P 500 posted 22 new 52-week highs and seven new lows; the Nasdaq Composite recorded 33 new highs and 324 new lows.

(Reporting by Sinéad Carew in New York, Sruthi Shankar and Ankika Biswas in Bengaluru; Editing by Vinay Dwivedi and Richard Chang)

Published under: Economy , Wall Street