US equities and Treasury yields gained as big-tech earnings helped support broader sentiment amid lingering concerns about the health of US regional banks as First Republic Bank extended a slide Wednesday.
(Bloomberg) — US equities and Treasury yields gained as big-tech earnings helped support broader sentiment amid lingering concerns about the health of US regional banks as First Republic Bank extended a slide Wednesday.
The tech-heavy Nasdaq 100 rose 1.3% after Google parent Alphabet Inc. and Microsoft Corp. both beat first-quarter earnings expectations late on Tuesday. Alphabet was little changed, while Microsoft rose 8.3%, even as the UK seperately vetoed a takeover of Activision Blizzard Inc. Meta Platforms Inc. is due to report after the bell.
Technology shares led gains within the S&P 500, up 0.2%, while further losses in First Republic, down another 20%, weighed on the benchmark index. The bank’s advisers have reportedly lined up potential buyers of new stock as part of a rescue plan for the beleaguered lender. Treasury yields rose. Meanwhile, PacWest Bancorp offered a glimmer of hope that First Republic doesn’t portend trouble for the broader sector. Its shares rose 15% amid signs of recovery in its deposit levels.
A run on deposits at First Republic has raised questions about the effect of the Federal Reserve’s aggressive rate hikes on US lenders and what the central bank can do to stop a bank crisis from spreading. Some market participants have speculated the tightening cycle may end sooner than expected, though inflation remains high. The Fed’s preferred measure of inflation, the so-called PCE deflator, is due Friday.
“Up to this point Fed officials have taken substantial comfort from indications that acute [bank] stress was contained and there was no immediate sudden stop to bank credit,” Krishna Guha, Evercore ISI’s head of central bank strategy, wrote. “That is a bit less firmly locked now, and we cannot rule out the possibility developments around First Republic could unfold in a manner that would lead the FOMC to skip [raising rates in] May while signaling a hike in June.”
In Europe, the regional stock benchmark declined 0.8% amid disappointing earnings. Software producer Dassault Systemes sank after missing revenue estimates. Dutch chip-tool maker ASM International slumped after offering a tepid outlook for the rest of the year. Roche Holding AG retreated even as its first-quarter sales exceeded expectations. Meanwhile, beats from Standard Chartered Plc and Sweden’s SEB AB failed to bolster sentiment.
“The markets are very much focused on some of the earnings story, but possibly overlooking the weight of economic deceleration that is playing through right now, particularly in the United States,” John Woods, Asia Pacific chief investment officer at Credit Suisse Group AG, said on Bloomberg Television. “I’m looking at a whole range of technical signals, which seem to be suggesting a risk-off environment.”
Looking ahead, Tony Welch of SignatureFD said he expects tech earnings to continue to shine.
“We always have to think about what the market has priced relative to expectations,” he said. “Throughout the first quarter of the year, the market was starting to price in, ‘okay, things aren’t as bad for big tech as what we thought they were. They’re going to be able to preserve profit margins better than we thought they were.’ I suspect you’re going to see a decent beat rate among those names that’s consistent with other earning seasons that we tend to see.”
Elsewhere in markets, oil fell and gold gained. Iron ore rose after a brief drop below $100 a ton for the first time since December. Bitcoin climbed.
Stocks
- The S&P 500 rose 0.2% as of 12:40 p.m. New York time
- The Nasdaq 100 rose 1.3%
- The Dow Jones Industrial Average was little changed
- The MSCI World index fell 1.3%
Currencies
- The Bloomberg Dollar Spot Index fell 0.2%
- The euro rose 0.6% to $1.1035
- The British pound rose 0.4% to $1.2461
- The Japanese yen was little changed at 133.86 per dollar
Cryptocurrencies
- Bitcoin rose 6.5% to $29,795.99
- Ether rose 4.7% to $1,948.5
Bonds
- The yield on 10-year Treasuries advanced five basis points to 3.45%
- Germany’s 10-year yield advanced one basis point to 2.40%
- Britain’s 10-year yield advanced three basis points to 3.73%
Commodities
- West Texas Intermediate crude fell 0.6% to $76.57 a barrel
- Gold futures fell 0.3% to $1,998.10 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Michael Msika, Tassia Sipahutar, Sujata Rao and Robert Brand.
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