Lacking Impetus Stocks Drift Downward Amid Persistent Regional Banks Worries

Barry Adams
09 May, 2023
New York City

Stocks remained in the downward trend ahead of two key inflation reports over the next two days. 

In muted trading, benchmark indexes are expected to trade sideways ahead of the consumer price inflation report Wednesday. 

Stocks have been on the defensive on a growing realization that the regional banking crisis is not likely to go away soon, despite the drumbeat of assurances offered by the Federal Reserve and Treasury officials. 

The Federal Reserve is struggling to tackle high inflation while avoiding the economy slipping into a deeper slowdown and healthy labor market. 

Despite the ten rate hikes over the last fourteen months, inflation is still significantly higher than the Fed's preferred target rate of 2%. 

Moreover, higher rates have dented balance sheets of banks after Treasury securities declined to reflect higher yields, forcing banks to slow lending to customers and shore up weakening capital bases. 

Treasury Secretary Janet Yellen confirmed in an interview with CNBC that there are no plans to halt targeted short selling in regional bank stocks. 

However, the U.S. Treasury is open to working with the Congress in expanding insurance limit for bank deposits, added Yellen. 

With no policy change in the immediate future and interest rates are likely to remain elevated, the decline in regional bank stocks is likely to continue. 

KRE, SPDR Regional Banking ETF, declined 2% in Monday's trading and extended this year's losses to 35.6%.    

In overseas trading European markets traded lower and the Hang Seng Index in Hong Kong declined 2% after tech stocks led the decliners. 

China's export growth slowed in April and trade surplus soared from a year ago but imports declined for the seventh month in a row reflecting uneven post-Covid economy recovery. 

 

China's Export Growth Slowed In April 

China's international trade data showed a sustained recovery for its goods for the second month in a row but weak demand at home led to the decline in imports for the seventh month in a row. 

China's exports rose 8.5% from a year ago in April to $295.42 billion, slower than the 14.5% rise in March according to the latest data released by the General Administration of Customs of China. 

Imports declined 7.9% in April to $205.21 billion, down from a 1.4% decline in March.  

Trade surplus in April soared to $90.21 billion from $49.47 billion a year ago.

On a monthly basis, exports decreased 6.4% and imports fell 9.7%. 

 

U.S. Indexes & Yields 

The S&P 500 index decreased 0.4% to 4,121.48 and the Nasdaq Composite fell 0.5% to 12,191.02.  

The yield on 2-year Treasury notes hovered at 4.00%, 10-year Treasury notes edged up to 3.499% and 30-year Treasury bonds held at 3.82%. 

Crude oil fell 75 cents to $72.42 a barrel and natural gas prices rose 3 cents to $2.25 a thermal unit. 

 

U.S. Stock Movers 

PayPal Holdings Inc decreased 7.2% to $70.50 after the payment services provider said net revenue in the first quarter increased 9% to $7.04 billion from $6.5 billion and net income increased 56% to $795 million from $509 million and diluted earnings per share increased to 70 cents from 43 cents a year ago. 

Total payment volume soared 10% from a year ago to $354.5 billion from $322.9 billion and payment transactions rose 13% to 5.8 billion. 

Total active accounts on a trailing 12 months basis increased 1% to 433 million and payment transactions per active accounts increased 13% to 53.1 million. 

In the first quarter, the company repurchased approximately 19 million of its shares for $1.4 billion and repurchased approximately 48 million shares for $4.1 billion.  

Lucid Group plunged 9.7% to $6.98 after the luxury electric vehicle marker said revenue in the first quarter increased to $149.4 million from $57.7 million and net loss widened to $779.5 million from $604.7 million and diluted loss per share increased to 43 cents from 36 cents a year ago. 

The electric vehicle company produced 2,314 units and delivered 1,406 units. The company said liquidity at the end of the quarter was $4.1 billion.  

Fresenius Medical SE increased 0.9% to $23.40 after the German dialysis company reported adjusted earnings that were ahead of expectations. 

Revenue in the first quarter increased 3.4% to €4.7 billion and net income fell 45.1% to €86 million from €157 million and basic earnings per share declined to 29 cents from 54 cents a year ago. 

Adjusted earnings per share, which excludes the U.S. Provider Relief Funding and Ukraine war related items among other adjustments, declined to 53 cents from 67 cents a year ago. 

Fresenius forecasted 2023 annual revenue "to grow at a low to mid-single digit percentage rate" from €19.39 billion and operating income to remain "flat or decline by up to a high-single digit percentage rate" from €1.54 billion.