Market Update
Investors Turned Cautious After Earnings Reports, Tesla Dropped 10%
Barry Adams
20 Apr, 2023
New York City
Major averages on Wall Street traded lower after poor quality of earnings added to economic slowdown worries.
The latest earnings announcements signaled depressed gross margins and lower profitability at some of the largest companies, raising the prospects of another round of downward earnings revisions.
Tesla dropped 11% after the electric vehicle maker reported a decline in first quarter earnings, dragging Apple, Microsoft and Amazon lower.
Chipmakers declined between 2% and 4% and Seagate Technology estimated weak revenue in the current quarter citing lower demand for micro computing products.
Lack of earnings guidance from several companies so far in the earnings season has also dented investor confidence.
American Express reported a decline in earnings and the company sharply hiked its estimate of credit provision to $1.3 billion also soured mood on Wall Street.
Regional banks were in focus after Zions Bancorp reported a 16% decline in its deposit balances, reflecting ongoing stress in smaller banks as more deposits moved out to larger banks.
Market sentiment was weak after the Philadelphia Fed manufacturing index fell more than expected and dropped to its lowest level since May 2020.
The index declined to -31.3 points from -23.2 in March, marking the eighth negative reading in a row, driven by weak order outlook.
Weak earnings guidance and falling earnings compounded to general macroeconomic worries and initial jobless claims edged up slightly at the end of last week.
U.S. Jobless Claims Edged Higher
Unemployment claims for the last week highlighted the tight labor markets conditions despite multiple rate hikes by the Federal Reserve.
Weekly initial jobless claims rose 5,000 to 245,000 for the week ending April 15, the U.S. Department of Labor reported Thursday.
The previous week's claims were upwardly revised 1,000 to 240,000.
The 4-week moving average decreased 500 to 239,750 from the previous week's revised average. The previous week's average was revised up by 250 to 240,250.
The advance seasonally adjusted insured unemployment rate was 1.3% for the week ending April 8, an increase of 0.1 percentage point from the previous week's unrevised rate.
U.S. Indexes & Yields
The S&P 500 index fell 0.6% to 4,129.96 and the Nasdaq Composite index declined 0.8% to 12,057.83.
The yield on 2-year Treasury notes declined to 4.17%, 10-year Treasury notes traded at 3.54% and 30-year Treasury bonds hovered near 3.75%.
Crude oil futures price for immediate month delivery decreased $1.93 to $77.36 barrel and natural gas hovered near $2.21 a thermal unit.
U.S. Stock Movers
Tesla Inc decreased 8.3% to $165.67 after the electric vehicle maker reported a sharp fall in earnings in the first quarter.
Revenue in the quarter rose 24% to $23.3 billion and net income declined 24% to $3.3 billion from $3.7 billion and diluted earnings per share fell to 95 cents from $1.07 a year ago.
Vehicle deliveries increased 36% to 422,875 from 310,048 a year ago.
American Express Company declined 3.7% to $158.96 after the payment processor said revenue rose but net income declined.
Revenue in the first quarter increased 22% to $14.3 billion and net income fell 13% to $1.8 billion from $2.1 billion and diluted earnings per share declined to $2.40 from $2.73 a year ago.
D R Horton Inc rose 6.9% to $108.87 after the home builder reported flat revenue and a decline in earnings.
Revenue in the fiscal second quarter ending in March was flat $7.9 billion and net income plunged to $949 million from $1.4 billion and diluted earnings per share fell to $2.73 from $4.03 a year ago.
Net sales orders for the fiscal second quarter fell 5% to 23,142 homes and 11% in value to $8.6 billion compared to 24,340 homes and $9.7 billion in the same quarter a year ago.
European Markets Trade Near Record Highs, German Wholesale Inflation Eased
European markets paused for the second day in a row ahead of central bank announcements in the next few weeks.
Cautions investors pored over a fresh batch of earnings and debated the future rate paths in the U.S. and the euro area.
Germany's producer prices sharply eased in March and extended monthly decreases to the sixth month in a row following the downward trajectory of energy prices.
Investors also welcomed the international goods trade swinging to surplus in February after exports rose faster than imports.
Eurozone Posted Trade Surplus In February
The euro area international goods trade swung to a surplus of Є4.6 billion in February from a deficit of Є9.4 in January, Eurostat reported Thursday.
The Euro Area recorded, for the first time since September 2021,
The goods trade surplus in February was €4.6 billion with the rest of the world compared with a deficit of €9.4 billion in February 2022.
Exports from the region increased 7.6% to €232.7 billion and imports rose 1.1% to €228.1 billion.
The Euro Are reported a rise in exports with all of its major trading partners.
Exports to the UK and Switzerland rose 10.4%, to the U.S. 10.9%, to Norway 14%, to Turkey 27.6% and to China 5.8%.
Exports of manufactured goods increased 7.2% driven by machinery and vehicles exports increase of 13.2% and chemicals 2.3%.
Overall imports rose 1.1% driven by 1.8% increase in raw materials purchase and fuel imports declined 8.2% and food imports rose 13.2%.
Imports from Switzerland declined 13.8%, from China fell 4.3% and from Russia plunged 77.3%.
In January and February 2023, euro area exports of goods to the rest of the world rose 9.2% to €455.3 billion and imports advanced 5.6% to €482.4 billion.
As a result the euro area recorded a deficit of €27.0 billion, compared with €39.7 billion a year ago.
Germany's Wholesale Price Inflation Dropped In March
Producer price inflation or wholesale inflation in Germany slowed to 7.5% in March from 15.8% in February, destatis or the Federal Statistics Office reported Thursday.
The wholesale price decline was largely driven by a steep fall in energy price inflation to 6.8% in February from 27.6% in January, distributed natural gas prices rose 19.1% and electricity prices were flat.
The preliminary estimate on natural gas and electricity inflation is subject to revision after adjusting for the government subsidy starting March.
Excluding energy, producer prices rose 7.9% from a year ago.
Wholesale price inflation on a monthly basis declined 2.6% in March from February, extending monthly decline to the sixth month in a row.
Prices of non-durable consumer goods increased by 15.4% in March and consumer durable goods rose 10.0% from a year ago.
Indexes & Yields
The DAX index decreased 0.6% to 15,795.71, the CAC-40 index fell 0.1% to 7,538.17 and the FTSE 100 index added 0.05% to 7,902.61.
The yield on 10-year German Bunds decreased to 2.47%5 French bonds to 2.95%, the UK Gilts to 3.76% and Italian bonds to 4.31%.
The euro inched lower to $1.097, the British pound to $1.247 and the Swiss franc to 89.37 cents.
Brent crude oil decreased $2.34 to $80.77 a barrel and the Dutch TTF natural gas edged up 42 cents to Є40.58 per MWh.
Stock Movers
Renault SA decreased 6.4% to €34.24 after the French automaker said revenue in the first quarter increased 29% and the company reaffirmed its annual outlook.
The stock was under pressure after the automaker said the company is reviewing its pricing for electric vehicles worldwide.
Volvo AB Class B increased 1% to SEK211.25 after the Swedish vehicle and industrial equipment maker posted higher adjusted earnings and lifted its outlook for its heavy duty truck unit on easing supply chain issues.
Schindler Holding AG increased 0.9% to Sfr 190.80 after the Swiss elevator and escalator maker said first quarter profit jumped 47%.
Nokia Oyj fell 4.3% to €4.08 after the Finnish telecom and technology company reported weaker-than-expected earnings in the first quarter.
Centamin PLC declined 0.8% to 105.59 pence after the gold miner reported a decline in gold production from the previous quarter.
Movers: Alaska Air, American Express, AT&T, DR Horton, IBM, Seagate Technology, Tesla, Zions Bancorp
Scott Peters
20 Apr, 2023
New York City
Alaska Air Group, Inc declined a fraction to $43.62 after the airline reported mixed quarterly results and reaffirmed annual outlook.
Revenue in the first quarter increased 31% to $2.2 billion and net loss shrank to $142 million from $143 million and diluted loss per share fell to $1.11 from $1.14 a year ago.
The regional airline guided second quarter revenue to rise between 2.5% and 5.5% and full-year 2023 earnings per share between $5.50 and $7.50.
American Express Company declined 3.7% to $158.96 after the payment processor said revenue rose but net income declined.
Revenue in the first quarter increased 22% to $14.3 billion and net income fell 13% to $1.8 billion from $2.1 billion and diluted earnings per share declined to $2.40 from $2.73 a year ago.
AT&T Inc decreased 10.1% to $17.70 after the telecom company reported weaker-than-expected quarterly results.
Revenue in the first quarter increased 1.4% to $30.1 billion and net income attributable to common stockholders declined to $4.2 billion from $4.8 billion and earnings per share fell to 57 cents from 65 cents a year ago.
Mobile telephony segment added 572,000 net subscribers in the quarter, slower than at least 650,000 postpaid subscribers in every quarter in 2022.
Fiber subscribers increased 272,000 to 7.8 million in the quarter.
The stock declined after the free cash flow at the end of the quarter fell to $1 billion from $2.8 billion a year ago but the telecom company retained its full-year free cash flow estimate of $16 billion.
D R Horton Inc rose 6.9% to $108.87 after the home builder reported flat revenue and a decline in earnings.
Revenue in the fiscal second quarter ending in March was flat $7.9 billion and net income plunged to $949 million from $1.4 billion and diluted earnings per share fell to $2.73 from $4.03 a year ago.
Net sales orders for the fiscal second quarter fell 5% to 23,142 homes and 11% in value to $8.6 billion compared to 24,340 homes and $9.7 billion in the same quarter a year ago.
The home builder guided full-year 2023 revenue in a range from $31.5 billion to $33.0 billion and estimated home sales between 77,000 and 80,000 units.
IBM increased 0.4% to $126.84 after the technology company reported better-than-expected earnings.
Revenue in the first quarter increased 0.4% to $14.3 billion and net income increased 41% to $927 million from $733 million and diluted earnings per share rose to $1.02 from 82 cents a year ago.
Free cash flow increased to $1.34 billion from $1.24 billion and long term debt increased to $53.8 billion from $46.2 billion from a year ago.
The company guided full-year 2023 free cash flow to increase $1.0 billion to $10.5 billion and revenue growth between 3% and 5% in constant currency.
Seagate Technology Holdings PLC declined 7.6% to $58.11 after the disk maker reported weak quarterly results.
Revenue in the fiscal third quarter ending in March declined to $1.8 billion from $2.8 billion and the company swung to a net loss of $433 million from $346 million and diluted earnings per share was ($2.09) compared to $1.56 a year ago.
The company also announced a restructuring plan to reduce its cost structure in the face of market weakness. The plan is expected to be completed by the year's end and cost $150 million.
Seagate forecasted venue in the fiscal fourth quarter decline to $1.7 billion with a band of $150 million and non-GAAP loss per share of 20 cents with a band of 20 cents.
Tesla Inc decreased 8.3% to $165.67 after the electric vehicle maker reported a sharp fall in earnings in the first quarter.
Revenue in the quarter rose 24% to $23.3 billion and net income declined 24% to $3.3 billion from $3.7 billion and diluted earnings per share fell to 95 cents from $1.07 a year ago.
Vehicle deliveries increased 36% to 422,875 from 310,048 a year ago.
Zions Bancorporation NA fell 4.3% to $31.32 after the regional bank reported a decline in deposits and earnings below expectations.
Net interest income in the first quarter increased 25% to $679 million and net income attributable to common stockholders increased to $198 million from $195 million and diluted earnings per share rose to $1.33 from $1.27 a year ago.
Net interest margin increased to 3.33% from 2.60% a year ago.
Stock fell after the bank reported a decline in deposits in the aftermath of the demise of Silicon Valley Bank on March 10.
Total deposits fell 16% or $13.1 billion to $69.2 billion at the end of the quarter.
More than two-thirds of the decrease related to accounts with balances greater than $10 million and loan-to-deposit ratio was 81%, compared with 62% in the prior year quarter.
Accounts with deposits larger than $250,000 are not insured by the Federal Deposit Insurance Corporation or FDIC, and balances larger than the insured amount may be lost in the event if the bank collapses.
U.S. Indexes Turn Lower After Weak Earnings Compound Economic Worries
Barry Adams
20 Apr, 2023
New York City
Stocks faced headwinds on earnings disappointments from several popular companies.
Benchmark indexes traded down after Tesla, Seagate Technology, AT&T and American Express reported weaker-than-expected earnings.
Tech stocks led the decliners after Tesla reported a 24% fall in earnings and cut prices on several electric vehicle models.
Seagate Technology also offered a downbeat outlook citing weak global demand.
Lack of earnings guidance from several companies so far in the earnings season has also dented investor confidence.
American Express reported a decline in earnings and the company sharply hiked its estimate of credit provision to $1.3 billion also soured mood on Wall Street.
Market sentiment was weak after the Philadelphia Fed manufacturing index fell more than expected and fell to its lowest level since May 2020.
Weak earnings guidance and falling earnings compounded to general macroeconomic worries and initial jobless claims edged up slightly at the end of last week.
Jobless Claims Edged Higher
Unemployment claims for the last week highlighted the tight labor markets conditions despite multiple rate hikes by the Federal Reserve.
Weekly initial jobless claims rose 5,000 to 245,000 for the week ending April 15, the U.S. Department of Labor reported Thursday.
The previous week's claims were upwardly revised 1,000 to 240,000.
The 4-week moving average decreased 500 to 239,750 from the previous week's revised average. The previous week's average was revised up by 250 to 240,250.
The advance seasonally adjusted insured unemployment rate was 1.3% for the week ending April 8, an increase of 0.1 percentage point from the previous week's unrevised rate.
Indexes & Yields
The S&P 500 index fell 0.6% to 4,128.21 and the Nasdaq Composite index declined 0.6% to 12,085.63.
The yield on 2-year Treasury notes declined to 4.17%, 10-year Treasury notes traded at 3.54% and 30-year Treasury bonds hovered near 3.75%.
Crude oil futures price for immediate month delivery decreased $1.60 to $77.66 barrel and natural gas hovered near $2.20 a thermal unit.
Stock Movers
Tesla Inc decreased 8.3% to $165.67 after the electric vehicle maker reported a sharp fall in earnings in the first quarter.
Revenue in the quarter rose 24% to $23.3 billion and net income declined 24% to $3.3 billion from $3.7 billion and diluted earnings per share fell to 95 cents from $1.07 a year ago.
Vehicle deliveries increased 36% to 422,875 from 310,048 a year ago.
American Express Company declined 3.7% to $158.96 after the payment processor said revenue rose but net income declined.
Revenue in the first quarter increased 22% to $14.3 billion and net income fell 13% to $1.8 billion from $2.1 billion and diluted earnings per share declined to $2.40 from $2.73 a year ago.
D R Horton Inc rose 6.9% to $108.87 after the home builder reported flat revenue and a decline in earnings.
Revenue in the fiscal second quarter ending in March was flat $7.9 billion and net income plunged to $949 million from $1.4 billion and diluted earnings per share fell to $2.73 from $4.03 a year ago.
Net sales orders for the fiscal second quarter fell 5% to 23,142 homes and 11% in value to $8.6 billion compared to 24,340 homes and $9.7 billion in the same quarter a year ago.
European Markets Hover Near Record Highs, Euro Area Posted Trade Surplus
Bridgette Randall
20 Apr, 2023
Frankfurt
European markets paused for the second day in a row ahead of central bank announcements in the next few weeks.
Cautions investors pored over a fresh batch of earnings and debated the future rate paths in the U.S. and the euro area.
Germany's producer prices sharply eased in March and extended monthly decreases to the sixth month in a row following the downward trajectory of energy prices.
Investors also welcomed the international goods trade swinging to surplus in February after exports rose faster than imports.
Eurozone Posted Trade Surplus In February
The euro area international goods trade swung to a surplus of Є4.6 billion in February from a deficit of Є9.4 in January, Eurostat reported Thursday.
The Euro Area recorded, for the first time since September 2021,
The goods trade surplus in February was €4.6 billion with the rest of the world compared with a deficit of €9.4 billion in February 2022.
Exports from the region increased 7.6% to €232.7 billion and imports rose 1.1% to €228.1 billion.
The Euro Are reported a rise in exports with all of its major trading partners.
Exports to the UK and Switzerland rose 10.4%, to the U.S. 10.9%, to Norway 14%, to Turkey 27.6% and to China 5.8%.
Exports of manufactured goods increased 7.2% driven by machinery and vehicles exports increase of 13.2% and chemicals 2.3%.
Overall imports rose 1.1% driven by 1.8% increase in raw materials purchase and fuel imports declined 8.2% and food imports rose 13.2%.
Imports from Switzerland declined 13.8%, from China fell 4.3% and from Russia plunged 77.3%.
In January and February 2023, euro area exports of goods to the rest of the world rose 9.2% to €455.3 billion and imports advanced 5.6% to €482.4 billion.
As a result the euro area recorded a deficit of €27.0 billion, compared with €39.7 billion a year ago.
Germany's Wholesale Price Inflation Dropped In March
Producer price inflation or wholesale inflation in Germany slowed to 7.5% in March from 15.8% in February, destatis or the Federal Statistics Office reported Thursday.
The wholesale price decline was largely driven by a steep fall in energy price inflation to 6.8% in February from 27.6% in January, distributed natural gas prices rose 19.1% and electricity prices were flat.
The preliminary estimate on natural gas and electricity inflation is subject to revision after adjusting for the government subsidy starting March.
Excluding energy, producer prices rose 7.9% from a year ago.
Wholesale price inflation on a monthly basis declined 2.6% in March from February, extending monthly decline to the sixth month in a row.
Prices of non-durable consumer goods increased by 15.4% in March and consumer durable goods rose 10.0% from a year ago.
Indexes & Yields
The DAX index decreased 0.8% to 15,761.04, the CAC-40 index fell 0.5% to 7,514.71 and the FTSE 100 index declined 0.2% to 7,881.75.
The yield on 10-year German Bunds decreased to 2.47%, French bonds to 2.97%, the UK Gilts to 3.82% and Italian bonds to 4.33%.
The euro inched lower to $1.097, the British pound to $1.247 and the Swiss franc to 89.37 cents.
Brent crude oil decreased $1.08 to $82.05 a barrel and the Dutch TTF natural gas edged up 68 cents to Є40.98 per MWh.
Stock Movers
Renault SA decreased 6.4% to €34.24 after the French automaker said revenue in the first quarter increased 29% and the company reaffirmed its annual outlook.
The stock was under pressure after the automaker said the company is reviewing its pricing for electric vehicles worldwide.
Volvo AB Class B increased 1% to SEK211.25 after the Swedish vehicle and industrial equipment maker posted higher adjusted earnings and lifted its outlook for its heavy duty truck unit on easing supply chain issues.
Schindler Holding AG increased 0.9% to Sfr 190.80 after the Swiss elevator and escalator maker said first quarter profit jumped 47%.
Nokia Oyj fell 4.3% to €4.08 after the Finnish telecom and technology company reported weaker-than-expected earnings in the first quarter.
Centamin PLC declined 0.8% to 105.59 pence after the gold miner reported a decline in gold production from the previous quarter.
Asian Markets Eased, Japan's Trade Deficit Expanded, China Banks Hold Rates
Arjun Pandit
20 Apr, 2023
Mumbai
Markets in Asia traded mixed with a downward bias and investors digested the latest earnings releases from the companies in the region and around the world.
China's commercial lenders kept lending rates unchanged for one-year and five-year loans, the National Bureau of Statistics reported Thursday.
Banks left one-year lending prime rate at 3.65% for the eighth month in a row and 5-year reference rate, used for home lending, was held at 4.3%.
Earlier in the week, the People's Bank of China left its medium-term policy rate at 2.75%.
The Nikkei index increased 0.2% to 28,672.85, the Shanghai Composite Index fell 0.7% to 3,345.36 and the Hang Seng Index decreased 0.1% to 3,345.36.
Markets in South Korea decreased 0.2% and the benchmark index in Australia was unchanged.
Benchmark indexes in India attempted a rebound after three days of weak trading amid better-than-expected earnings from domestic corporations.
In Mumbai, investors turned cautious on the worries that crude oil prices may rebound faster after a stronger-than-expected first quarter GDP rebound in China.
India imports about 70% of its energy needs, and higher crude oil prices fuel domestic inflation.
Japan's International Trade Deficit Expanded In March
Japan reported a rise in its trade deficit for the 20th month in a row, after imports rose faster than exports, the Ministry of Finance reported Thursday.
Trade deficit advanced to ¥754.7 billion in March from ¥464.9 billion a year ago and stretched the longest stretch of deficit since 2015.
Imports increased 7.3% to ¥9,578.8 billion and exports increased 4.3% to ¥7,654.7 billion.
Exports increased for the 25th month in a row and imports advanced 26th month in a row on rising commodities and energy prices.
Higher energy prices expanded the trade deficit in the first quarter to ¥5,151.2 billion from ¥3,375.9 billion a year ago.
If commodities and energy prices continue to remain elevated, Japan is likely to record its third annual trade deficit in a row following the shortfall of 19,971.3 billion in 2022.
Japan's Trade Deficit Expanded 20th Month In a Row In March
Brian Turner
20 Apr, 2023
New York City
Japan reported a rise in its trade deficit for the 20th month in a row, after imports rose faster than exports, the Ministry of Finance reported Thursday.
Trade deficit advanced to ¥754.7 billion in March from ¥464.9 billion a year ago and stretched the longest stretch of deficit since 2015.
Imports increased 7.3% to ¥9,578.8 billion and exports increased 4.3% to ¥7,654.7 billion.
Exports increased for the 25th month in a row and imports advanced 26th month in a row on rising commodities and energy prices.
Higher energy prices expanded the trade deficit in the first quarter to ¥5,151.2 billion from ¥3,375.9 billion a year ago.
If commodities and energy prices continue to remain elevated, Japan is likely to record its third annual trade deficit in a row following the shortfall of 19,971.3 billion in 2022.
After Mixed Batch of Earnings, Stocks Wavered, Treasury Yields Advanced, Oil Eased
Barry Adams
19 Apr, 2023
New York City
Benchmark indexes opened lower but stocks managed to climb above flatline after investors digested a fresh batch of earnings.
Major averages steadily advanced after the first hour of trading and crossed the flatline after 2:00 p.m. ET and treasury bond yields inched higher.
Western Alliance Bancorp soared 40% after the regional bank said deposits increased $2.0 billion, reversing the fall after the collapse of Silicon Valley Bank on March 10.
Investors are looking ahead to quarterly results of Zions Bancorp, another regional bank in focus, after the close on Wednesday.
So far regional banks are holding on to bank deposits despite the losses in securities held for maturity caused by the rapid rise in interest rates, a strong vote of confidence from depositors.
Deposit outflow from regional banks to larger rivals and to Treasury securities have appeared to ebb, providing critical support to the regional banks.
But, banks have not passed on higher rates to depositors, and expanded net interest margin to drive profitability higher.
Morgan Stanley, Bank of New York Mellon, U.S. Bancorp reported better-than-anticipated quarterly results, despite the ongoing weakness in investment banking revenues.
The Federal Reserve has lifted rates nine times in the last thirteen years, but banks have still not raised rates on deposits but banks have passed on higher rates to borrowers.
Consumers are getting hit from all sides, higher inflation drives higher the cost of living and savers are still not rewarded by banks and wages are lagging overall inflation.
Current drivers of inflation are fuel prices, housing market and above inflation price increases carried out by corporations, which are all hitting consumers and families hard.
Manufactured goods price increase and service inflation were the main drivers of profit for the last five quarters, the trend reflected in the latest quarterly results.
United Airlines reported a sharp decline in quarterly loss after revenues soared, reflecting higher prices per available seat mile.
Home Affordability and High Rates Dampens Demand for Mortgages
Mortgage applications in the week ending on April 14 declined after rates rose and buyers struggled with elevated home prices, the Mortgage Bankers Association reported Wednesday.
Mortgage applications fell 8.8% reversing the gain of 5.3% in the previous week.
The average contract rate for 30-year fixed-rate mortgage, for loan balances less than $726,000, increased to 6.43%.
Home purchase mortgage applications dropped 10% and refinance applications declined 5.8%.
“Affordability challenges persist and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act,” MBA's chief economist Joel Kan noted in the weekly release.
U.S. Indexes & Yields
The S&P 500 index increased 1.58 points to 4,156.72 and the Nasdaq Composite index increased 19.95 points to 12,173.11.
The yield on 2-year treasury notes rose to 4.26%, 10-year treasury notes advanced to 3.60% and 30-year treasury bonds to 3.79%.
Crude oil fell $1.57 to $79.28 a barrel and natural gas futures fell 14 cents to $2.21 a thermal unit.
U.S. Stock Movers
Tesla Inc decreased 2.2% to $180.25 after the electric vehicle maker lowered prices on some of its models for the sixth time this year.
Netflix Inc declined 1.8% to $327.59 after the video streaming services provider reported better-than-expected earnings in the first quarter but offered weak second quarter outlook.
Morgan Stanley declined 3% to $87.0 after the financial services provider said first quarter revenue and earnings fell.
Revenue in the first quarter decreased to $14.5 billion from $14.8 billion and net income dropped to $3.0 billion from $3.7 billion and diluted earnings per share eased to $1.70 from $2.02 a year ago.
Revenue in the institutional securities segment decreased to $6.7 billion from $7.8 billion, wealth management increased to $6.5 billion from $5.9 billion and investment management declined to $1.28 billion from $1.33 billion a year ago.
Assets under management dropped to $1.34 trillion from $1.44 trillion a year ago.
Fox Corp Class A stock declined 0.7% to $33.75 after the company agreed to pay $787.50 million to settle a lawsuit brought by Dominion Voting System and avoided a 6-week trial.
Dominion had asked for $1.6 billion in damages but settled for a smaller amount after Fox News and its cable affiliates repeatedly aired false claims that the voting machine maker had helped rig the 2020 presidential election in favor of Joe Biden against Donald Trump.
European Markets On Hold After Rate Path Worries Resurfaced
European markets paused but stayed near the record territory as rate path worries resurfaced.
The latest reading on consumer price inflation, showed the stubborn nature of inflation forces, as the headline inflation stayed above 10.0% and core inflation hovered near the record level reached six months ago.
After the inflation data, traders forecasted another 25 basis points increase in UK's interest rates after the policy meeting on May 11.
But investors are still divided on the next moves from the U.S. Federal Reserve. Most investors are anticipating a rate hike of 25 basis points on May 3rd, but the rate path is uncertain after.
Markets anticipating that the Fed may pause after the rate hike in May but terminal rates may rise to as high as 5.75%.
On the earnings front, Heineken reported larger-than-expected decline in beer sales in the first quarter but reaffirmed its annual earnings outlook.
ASML Holding, the Netherlands-based semiconductor chip equipment maker, reported better-than-expected earnings.
Euro Area Core Inflation Accelerated In March
The Euro Area consumer price inflation eased for the fifth month in a row, Eurostat reported Wednesday.
The annual rate of price increase in March slowed to 6.9%, the lowest level since February 2022 and significantly lower than the peak rate of 10.6% in October.
Despite the decline in overall rate of inflation, core inflation which excludes food and energy, accelerated to record high 5.7%.
The rise in core rate put the stock market on alert and raised the prospect of the European Central Bank continuing its aggressive rate hike policy.
Service inflation accelerated to 5.1% from 4.8% in February and food, alcohol and tobacco inflation expanded to 15.5% from 15.0% respectively.
Energy prices declined 0.9% in March, first month of price decline in two years.
UK Consumer Inflation Stays Above 10%
The consumer price inflation rate eased to 10.1% in March from 10.4% in February, the Office for National Statistics reported Wednesday.
The consumer price inflation remained above 10% for the seventh month in a row and well above the 2% target set by the Bank of England.
Inflation was driven by price increases in food and elevated cost of energy utilities and housing.
Food and non-alcoholic beverage inflation accelerated to 19.1% from 18.0% in February and housing and utilities inflation eased slightly to 26.1% from 26.6% in the previous month.
Core rate of inflation, which excludes food and energy, rose 6.2% in March, slightly lower than the peak rate of 6.5% in September 2022.
Europe Indexes & Yields
The DAX index increased 12.59 points to 15,895.20, the CAC-40 index rose 15.81 points to 7,549.44 and the FTSE 100 index decreased 10.67 to 7,898.77.
The yield on 10-year German Bunds rose to 2.50%, French bonds ended at 3.0%, the UK Gilts increased to 3.85% and Italian bonds to 4.36%.
The euro traded at $1.095, the British pound at $1.243 and the Swiss franc at 89.83 cents.
Brent crude oil declined $1.73 to $83.04 a barrel and the Dutch TTF natural gas declined Є2.43 at Є40.30 per MWh.
Europe Stock Movers
Resource stocks were on the defensive after commodities prices eased a day after China optimism lifted prices.
Glencore Plc fell 0.9% to 493.30 pence, Anglo American plc declined 2.2% to 2,739.0 pence and BHP Group Limited decreased 0.8% to 2,520.50 pence.
Heineken Holding NV increased 1.7% to €87.50 after the company reported first quarter sales increased 9.2% to €6.4 billion.
Heineken brand beer volume rose 2.3% but overall organic beer volume declined 3% to 54.8 mhl.
ASML Holding NV decreased 2.4% to €574.70 after the advanced semiconductor equipment maker said revenue in the first quarter increased to €6.7 billion from €6.4 billion a year ago.
Net income in the first quarter increased to €1.95 billion from €1.81 billion and diluted earnings per share rose €4.96 from €4.60 a year ago.
Net booking in the quarter declined to €3.8 billion compared to €6.3 billion in the fourth quarter.
ASML forecasted second quarter 2023 net sales between €6.5 billion and €7.0 billion and a gross margin between 50% and 51%.