The New York Stock Exchange had a bad day on Tuesday, its worst session in more than a month, weighed down by banks and some corporate results.
The Dow Jones index gave up 1.02% to end on 33,530.83 points. The tech-dominated Nasdaq lost 1.98% to finish on 11,799.16 points and the S&P 500 dropped 1.58% to 4.071.63 points.
The so-called “fear index” – officially the VIX Index – which measures market volatility, jumped 15%.
Banking jitters
This was the first day since 22 March that the major indices were down more than 1%, Steve Sosnick, chief strategist at Interactive Brokers, said in an interview with AFP.
For Edward Moya, an analyst for Oanda, US stocks softened between mixed corporate results, banking jitters and the news that President Joe Biden will run for re-election.
The banking sector, in particular, weighed on the market, in the wake of the collapse of shares in First Republic. The California-based bank, which had closed sharply higher (+ 12%) the previous day, was slammed on Tuesday, plunging 49.38% to $8.10.
It had announced after the close of trading on Monday that its net deposits had melted by 41% – or $72 billion – in the first quarter. Several major U.S. banks poured money into First Republic to help, but the news went viral.
Big banks post losses, Amazon too
“It was a little scary on the banking side,” Sosnick acknowledged, noting the rout in shares of other regional banks such as PacWest (-8.92%) and Western Alliance (-5.65%).
Big banks also took on water, losing between 2% and 3%, from Bank of America and JPMorgan to Citigroup.
The technology sector looked grim, with Amazon plunging sharply (-3.43%) ahead of its earnings release on Thursday. Alphabet gave up 2.03%, but recovered in electronic trading (+4.53%). Google’s parent company beat expectations with first-quarter net income of $15 billion.
Similar pattern for Microsoft (-2.25% at the close, then +4.68%), reporting significantly better-than-expected quarterly results, with a 7% year-on-year increase in revenue to $52.8 billion.
UPS drops almost 10%, US dollar gains 0.65%
Express carrier UPS worried investors, falling almost 10%. It warned that the economic slowdown and changing consumer habits were weighing on its business.
To that should be added the Conference Board’s index of US household sentiment, which suffered a bigger-than-expected drop in April, especially in the face of recession fears.
In the bond market, yields on two-year Treasuries melted 15 basis points to 3.93%, from 4.08% the previous day. This illustrates the “flight to safety” triggered by banking fears, Steve Sosnick pointed out.
Despite the decline in bond yields, the dollar gained value, climbing to $1.0974 to the euro (+ 0.65%) at around 20:15 GMT – yet another indicator of strong risk aversion.
