Stocks close lower Tuesday as investors’ bank fears return, Dow sheds more than 300 points: Live updates

General Motors earnings beat expectations. Here's what the experts have to say
General Motors earnings beat expectations. Here's what the experts have to say

Stocks slid Tuesday after First Republic Bank's earnings report reignited concerns about the broader sector.

The Dow Jones Industrial Average fell 344.57 points, or 1.02%, to end at 33,530.83. The S&P 500 finished 1.58% lower at 4,071.63. The Nasdaq Composite dropped 1.98% to close at 11,799.16.


Shares of First Republic Bank tumbled more than 49% after the regional bank posted its latest quarterly results, saying late Monday that deposits dropped 40% to $104.5 billion in the first quarter but have since stabilized. First Republic will also be trimming expenses, including slashing headcount by 20% to 25% in the second quarter. Bloomberg News reported Tuesday that the bank was trying to sell as much as $100 billion of loans and securities to restructure its balance sheet.

The regional bank has been closely watched after investors grew concerned it could face the same fate as Silicon Valley Bank and Signature Bank, whose closures set off an industry crisis last month. First Republic shares have collapsed more than 93% so far this year.

Both the SPDR S&P Regional Banking ETF (KRE) and SPDR S&P Bank ETF (KBE) lost more than 4% and 3%, respectively, as financials weighed on the market. Western Alliance Bancorp slid 5.6%, and PacWest dropped 8.9%. Charles Schwab shed almost 4%. The market fell in sympathy as First Republic shares notched new lows in afternoon trading.

"For the first time since this earnings season has started, we've actually seen the market react," said Art Hogan, chief market strategist at B. Riley Wealth Management. "There's been a built up, or pent up, selling reaction to earnings that are just OK, but not great. And today the floodgates seemed to have opened — and once that started, nobody seems to want to get in the way."

Traders also fretted over a disappointing earnings report from UPS, which dropped about 10% after the company missed expectations and management said sales volumes were — and should continue to be — under pressure. PepsiCo, on the other hand, rose 2.3% on better-than-expected numbers.

Microsoft and Alphabet are slated to report Tuesday after the bell, the first of multiple Big Tech names on the earnings schedule this week. But those stocks could struggle, according to Jay Hatfield of Infrastructure Capital Management, after rallying earlier this year

Alphabet shares fell 2% ahead of the Google-parent's earnings after the market closes. The company has been on an earnings cold streak, missing Wall Street estimates the last four quarters, according to Bespoke Investment Group.

"Tech isn't working as a ballast because it ran up so much and because we're getting close to earnings," Hatfield said. "The rubber is hitting the road, so those companies have to do quite well to justify it."

— CNBC's Jesse Pound contributed reporting

Lea la cobertura del mercado de hoy en español aquí.

Correction: A previous version misstated when Amazon reports earnings.

Stocks close lower

The three major indexes finished Tuesday's session lower.

The Nasdaq Composite ended down 2%. The S&P 500 slid 1.6%, while the Dow dropped 1%.

— Alex Harring

Narrow advance and failure of most stocks to rally in 2023 warn of recession, JPMorgan says

Stock market investors should be worried that so much of this year's rally is accounted for by so few stocks, and that the vast majority of stocks failed to participate in the market's advance in 2023, Dubravko Lakos-Bujas, chief U.S. equity strategist and global head of quantitative research at JPMorgan, told clients in a report Tuesday.

Although the S&P 500 was higher by about 8% year-to-date starting Tuesday, "the underlying market breadth by some measures is the weakest ever," or at the very least the "narrowest stock leadership in an up market since [the] 1990s."

The strategist has recently seen investors shifting into more defensive, "safety" stocks, including megacaps with low volatility and "quality" profitability and balance sheets, and out of value stocks.

By JPMorgan's lights, "this rotation is only ~33% underway when compared to prior end of cycles" and means that "the current degree of crowding implies the risk of recession is far from priced in."

Worryingly for investors, "market concentration into a handful of Growth stocks has already reached extreme levels."

At the same time, 1) the darkening outlook for earnings growth due to lower demand and weaker profit margins, 2) risks associated with the debt ceiling debate 3) capital losses and asset writedowns at banks, 4) declining money supply, 5) commercial real estate defaults and 6) heightened pressure on floating rate debt and leveraged loans from higher interest rates, "are not appreciated by the market," Lakos-Bujas said.

— Scott Schnipper, Michael Bloom

'Drop-dead' date on debt ceiling could extend to August, Evercore ISI says

The U.S. likely will be able to avoid a debt default until as late as mid-August though Treasury officials likely will try to instill a greater sense of urgency to Congress, according to Evercore ISI economist Stan Shipley.

"We estimate the 'drop dead' date for the debt ceiling is between late July and mid-August, depending on outlays," Shipley said in a client note Tuesday.

Officials are currently using so-called extraordinary measures to continue paying bills while Congress debates the debt ceiling extension. Markets currently are pricing in a low but rising chance that the government could default on its obligations, an event that almost certainly would lower the U.S. credit rating and create tumult through financial markets.

Shipley said he expects that Treasury officials are watching the situation closely and could inject a more urgent air into the debate if it appears that the current measures could expire in June.

"For this reason, we suspect that when Treasury provides an update on timing (likely this week), they will continue emphasizing that they are confident in avoiding a breach through early June, but unable to project a later date with the requisite degree of confidence," he wrote. "This may keep the DC debate focused on a June timeline, despite the likelihood that we can survive deeper into the summer."

—Jeff Cox

Morgan Stanley says AI tools will drive tech leaders towards efficiency, slower hiring

With the rise of artificial intelligence tools, Morgan Stanley expects tech companies to slow hiring and implement more disciplined budgeting going forward as efficiency becomes a larger focus.

In a note sent to clients on Monday, equity analyst Brian Nowak named Facebook-parent Meta, Google and Amazon as tech companies that have room to reduce their headcount and increase their productivity.

"Forward hiring levels should arguably be smaller and more targeted due to rapidly-emerging AI productivity drivers," Nowak wrote in the note. "This speaks to the opportunity for tech leaders to be early adopters of new AI innovation…and the potential to create a structurally more efficient workforce."

The rapid growth of AI-assisted coding tools is making engineers more productive, Nowak said, adding that Microsoft developers using GitHub Copilot are already increasing their productivity by about 55%. AI-based sales tools are also making sales teams more efficient and internal tasks are likely to become more automated, Nowak said. 

This week is a busy one for Big Tech, with Google-parent Alphabet and Microsoft reporting first quarter earnings after the bell on Tuesday, Meta on Wednesday and Amazon on Thursday. 

— Pia Singh

First Republic stock on pace for its fifth-biggest volume day on record

Despite multiple trading halts, First Republic has traded more than 140 million shares so far and is on pace for its fifth biggest-volume day on record.

Shares plunged more than 43% Tuesday as investors became concerns on the bank's stability after it lost approximately 40% of its deposits in the previous quarter.

First Republic's stock is close to doubling its 30-day average of nearly 73 million shares and is the most-active stock on the New York Stock Exchange as of Tuesday afternoon.

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First Republic Bank

— Hakyung Kim, Nicholas Wells

Tesla's volume goals for the Model 3 and Model Y were unrealistic, analyst says

Tesla's volume goals for both the Model Y and Model 3 were "unrealistically aggressive," according to Alliance Bernstein.

AB analyst Toni Sacconaghi said in a Tuesday note that Tesla's target of three to four million cars per year for the Model 3 and Y would essentially amount to roughly 50% of the global market share for luxury cars. Both vehicles fit into that category.

As a result, the company had no choice but to cut prices extensively in order to try to reach volume goals.

"Despite price reductions, Tesla still appears to be struggling to generate sufficient demand to meet its targets, and the impact from price cuts to date has been short-lived," Sacconaghi said.

— Brian Evans

Stocks remain down entering final hour of trading

The three major indexes stayed in the red as investors entered the final hour of trading.

The Dow was 326 points, or 1%, lower. The S&P 500 dropped 1.4%, while the Nasdaq Composite slid1.7%.

— Alex Harring

General Motors stock 'goes nowhere' despite management heading in the right direction, Josh Brown says

Despite executive leadership at General Motors seemingly making the right moves, it isn't enough to keep wealth advisor Josh Brown interested.

"This stock is like watching paint dry," Brown said Tuesday on CNBC's "Halftime Report." "Basically it does nothing, goes nowhere, [and] it's only a 1% dividend yield so not enough to keep me interested."

Brown added that from a business standpoint, the company has made the right moves from both its entry and execution of its electric vehicle sector.

But "it just doesn't matter" and "nobody cares," he said.

GM reported quarterly results earlier on Tuesday, beating on both adjusted earnings and revenue. Read the full breakdown here.

— Brian Evans

These companies could take a hit from Bed, Bath & Beyond's bankruptcy

Despite the well-telegraphed troubles at Bed, Bath & Beyond, some suppliers could take a hit from the home goods retailer's bankruptcy, DA Davidson's Linda Bolton Weiser said. She anticipates the company will be liquidated, "with no recovery for unsecured creditors."

Bed, Bath's top suppliers traditionally included Mattel, 1-800-Flowers, Lifetime Brands and Helen of Troy, but these companies were paring back shipments to the struggling retailer. Still, 1-800-Flower's PMall ranks second on the list of top 30 creditors, with $11.1 million owed to it; Tempur Sealy ranks 12th, with $3.7 million exposed; while Lifetime is 15th on the list, with $3.3 million on the line, Bolton Weiser wrote in research note.

According to the analyst, Lifetime had only been selling private-label goods to Bed, Bath and had some reserves accrued for accounts receivable as of the fourth quarter. Last year, sales to Bed Bath & Beyond were less than 1% of Lifetime's total sales.

On the flip side, Bolton Weiser expects Walmart, Target and TJX's Home Goods to benefit from picking up market share from former Bed, Bath customers.

—Christina Cheddar Berk

Stocks making the biggest moves during Tuesday's trading session

Check out the companies making headlines in midday trading.

First Republic Bank — Shares of the regional bank plummeted as much as 44% after it said Monday that deposits fell by 40% to $104.5 billion during the first quarter, which came below Wall Street's expectations. The San Francisco-based bank said that its deposit flows have since stabilized. Shares have tumbled about 90% year to date. 

United Parcel Service  — Shares of the shipping giant fell 9.3%. The company fell short of analysts' expectations on the top and bottom lines, according to Refinitiv.

Fiserv — The global payments processor's shares jumped 3.6%. Fiserv's first-quarter earnings per share and revenue topped analysts' estimates, according to FactSet. The company also raised its full-year outlook and said it expects organic revenue growth between 8% to 9%. 

Centene — The health-care operator's shares gained 3% after Centene reported a beat on its adjusted earnings and revenue for the first quarter. The company's full-year guidance for 2023 also came above expectations. To be sure, Centene's full-year outlook for 2024 is below analysts' estimates, according to FactSet. 

The full list can be found here.

— Hakyung Kim

24 Dow stocks trade down

Twenty-four of the 30 members of the Dow were down in Tuesday's session, helping to push the index around 300 points into the red.

Merck, Verizon, IBM, Amgen, Johnson & Johnson and UnitedHealth were the six members of the blue-chip trading above the flatline. The other 24 were below their flatlines, led down by Dow, Inc.'s 4.6% slide.

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