Tech Earnings Anxieties Keep Major Averages Down, Nasdaq Down 1%

Barry Adams
25 Apr, 2023
New York City

Stocks traded lower and investors reviewed the latest batch of earnings. 

The familiar pattern of higher sales, driven by price increases, but weaker volumes or transactions was on display in the current batch of earnings. 

Moreover, regional banks were under pressure after First Republic reported higher-than-expected deposit outflows and borrowings soared. 

The sustained and rapid increase in interest rates are having negative impacts on securities assets of all banks, including regional, small and large. 

Moreover, if banks suffer deposit outflows, then the unrealized losses in treasury securities have to be realized to shore up capital or seek alternative capital infusion. 

More losses are on the way for many regional and large banks, if rates continue to rise at rapid pace, forcing more banks to seek capital infusion either from the Federal Reserve or from investors. 

Investors turned cautious ahead of the earnings release from big tech companies later this week. 

 

New Home Sales Unexpectedly Soared In March 

New home sales unexpectedly increased in March, the latest data from the Commerce Department showed Tuesday. 

New home sales in March rose 9.6% from the previous month to $683,000 and February home sales were revised to 623,000, but 3.4% lower than in the month a year ago. 

The median sales price of new homes sold in March was $449,800 and the average sales price was $562,400.

Sales soared 170.8% to 65,000 in the Northeast, 29.8% to 161,000 in the West and 6% to 71,000 in the Midwest but decreased 5.4% to 386,000 in the South. 

 

Indexes & Yields 

The S&P 500 index declined 0.7% to 4,106.41 and the Nasdaq Composite index dropped 0.9% to 11,926.90. 

The yield in 2-year Treasury notes eased to 4.01%, 10-year Treasury notes fell to 3.39% and 30-year Treasury bonds dropped to 3.64%. 

Crude oil decreased $1.90 to $76.86 a barrel and natural gas dropped 5 cents to $2.21 a thermal unit. 

 

Stock Movers 

First Republic Bank plunged 27.4% to $11.62 after the regional bank reported elevated deposit outflows.  

said revenue in the first quarter declined 13.4% from a year ago to $1.2 billion and net interest margin fell 19.4% to $923 million. 

Net income in the quarter declined 32.9% to $269 million from $401 million and diluted earnings per share fell to $1.23 from $2.0 a year ago. 

On the balance sheet front, loans increased 22.6% from a year ago to $173.3 million, total deposits 35.5% to $104.5 billion and borrowings soared by $101.2 billion to $106.7 billion. 

At the end of March, excluding the $30 billion of deposits made by the large U.S. banks, the bank's estimated uninsured deposits totaled $19.8 billion, or 27% of total deposits. 

Insured deposits fell moderately during the quarter and have "remained stable" from March 31 through April 21. 

PepsiCo Inc rose 2.4% to $189.99 after the food and beverage maker reported better-than-expected quarterly results. 

The company said first quarter revenue increased 10.2% to $17.8 billion and net income of $1.3 billion. 

The company lifted its full-year 2023 growth estimate of organic revenue to 8% from the previous estimate of 6% and  core constant currency earnings per share to 9% from 8%. 

United Parcel Service, Inc dropped 8.9% to $178.40 after the company reported weaker-than-expected quarterly results. 

Ameriprise Financial, Inc decreased 5.8% to $294.47 despite the financial services provider reported better-than-expected earnings.