Stock market today: First Republic falls more, tech rallies
By Stan Choe, The Associated Press on April 26, 2023.
NEW YORK (AP) – Wall Street closed lower again, though a rally for Microsoft and some other Big Tech stocks helped limit the losses. The S&P 500 fell 0.4% Wednesday after erasing an earlier gain. The index is coming off its worst day in a month, hurt by concerns about the strength of U.S. banks. The spotlight has been harshest on First Republic Bank, which lost another 30% after nearly halving the day before. Microsoft helped stanch the market’s losses after it surged following a stronger profit report than analysts expected. Treasury yields were mixed. THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below. NEW YORK (AP) – Wall Street is falling again Wednesday, though a rally for Microsoft and some other Big Tech stocks is helping to limit the losses. The S&P 500 was 0.5% lower in late trading after erasing an earlier gain. The Dow Jones Industrial Average was down 237 points, or 0.7%, at 33,283, with less than an hour to go in trading, while the Nasdaq composite was leading the market with a 0.4% gain. Wall Street is coming off its worst day in a month, hurt by concerns about the strength of U.S. banks. The spotlight has been harshest on First Republic Bank, which lost another 33% after nearly halving the day before. That’s when it detailed for the first time how many of its customers bolted amid last month’s turmoil in the industry. The worry is that it and other smaller and mid-sized banks could suffer debilitating runs of deposits from customers, similar to the ones that caused the second- and third-largest U.S. bank failures in history last month. PacWest Bancorp., another bank that’s been in investors’ spotlight, rose 8.4% after reporting stronger results than expected and saying that its deposits have grown since late March. That may offer optimism that First Republic’s struggles could be specific to itself, rather than a symptom of deeper issues with the system. Also dropping sharply Wednesday was Enphase Energy, which fell 26.4% despite reporting stronger profit and revenue for the latest quarter than forecast. Analysts pointed to its revenue forecast for the current quarter, which fell short of some expectations. Activision Blizzard, meanwhile, tumbled 11.4% after U.K. regulators blocked its takeover by Microsoft on concerns it would hurt competition in the cloud gaming market. BIG TECH BLOOMS While the majority of stocks were falling, gains for Microsoft and other Big Tech companies prevented a sharper slide for the market. Microsoft rose 7.3% after reporting stronger profit for the first three months of the year than analysts expected. It carries a huge weight on the S&P 500 because it’s the second-largest stock in the index. Tech stocks have broadly been some of the year’s best performers so far as they’ve laid off workers and made other cost cuts to improve their profitability. Hopes for a coming pause from the Federal Reserve on its barrage of hikes to interest rates have also helped them in particular. Google’s parent company, Alphabet, also turned a bigger profit than expected. But it’s stock fell 0.5% after drifting between gains and losses through the day. It reported its first back-to-back drops in advertising revenue from a year earlier since it became a publicly traded company in 2004. More Big Tech companies are scheduled to follow with their own reports soon. Facebook’s parent company, Meta Platforms, rose 0.7% ahead of its report, which is due after trading closes for the day. WHY CHIPOTLE IS HIGHER Chipotle Mexican Grill jumped 13.4% for the biggest gain in the S&P 500 after reporting stronger profit than expected. It was one of a few companies that raised hopes consumer spending could remain resilient despite a slowing economy. That’s key because it makes up the bulk of the U.S. economy. Stocks have been mostly listless in recent weeks, as Wall Street struggles with several questions. With few answers imminent, Mark Haefele, UBS Global Wealth Management’s chief investment officer, expects stocks to stay stuck in a range. Not only are investors worried about the possibility of a recession this year, he said stocks also look expensive relative to profits. That means “the scope for upside appears limited, in our view,” he said. Scott Wren, senior global market strategist at Wells Fargo Investment Institute, sees the S&P 500 largely remaining within a range of 3,700 to 4,200 this year. It’s within the top half of that range, which means he’s not looking to “chase this equity rally.” THE FED AND RATES All banks are contending with much higher interest rates, which have flown higher over the past year to tighten the screws on the economy and financial markets. The Federal Reserve has hiked its key overnight interest rate to its highest level since 2007. It’s trying to rein in high inflation, but its main tool to do so is a notoriously blunt one. High rates slow the entire economy and hurt prices for investments. That has many investors and economists preparing for a possible recession. Besides the cracks in the banking system, high rates have already slowed the housing, manufacturing and other industries. The job market, meanwhile, remains relatively solid. A report on Wednesday showed that orders for long-lasting manufactured goods were stronger in March than expected. In the bond market, the yield on the 10-year Treasury rose to 3.42% from 3.40% late Tuesday. It helps set rates for mortgages and other loans. The two-year Treasury yield, which more closely tracks expectations for the Fed, fell to 3.92% from 3.95% late Tuesday. ___ AP Business Writers Yuri Kageyama and Matt Ott contributed. 29-28
