This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Bank stocks fell as First Republic reignited fears. Meanwhile, Alphabet and Microsoft beat earnings estimates, giving markets a chance to rally around tech.
What you need to know today
- Alphabet, Google's parent company, reported a 3% increase in first-quarter revenue to $69.79 billion from a year earlier, though net income fell from $16.44 billion to $15.05 billion. Nonetheless, the technology giant beat earnings and revenue forecasts after missing both for four straight quarters. Also, its cloud business finally turned profitable. Alphabet shares rose 1.3% in extended trading.
- Microsoft's revenue increased 7% year over year to $52.86 billion, and its net income rose 9% to $18.3 billion for the quarter ended March 31. Both top and bottom line numbers beat expectations, causing shares to surge 9% in overnight trading.
- Turning to banks, UBS' first-quarter profit fell 52% year on year to $1.03 billion, largely because of a $665 million provision it had to make for litigation related to mortgage-backed securities the bank sold almost 20 years ago. However, the bank's wealth management unit attracted $28 billion amid the banking turmoil in March. Still, that news couldn't stop shares from sliding 2.17%.
- First Republic Bank fared worse. On Monday, the U.S. bank reported after markets closed that its deposits sank 40.8%; on Tuesday, traders fled the stock, causing it plummet 49.38% to hit a record low.
- U.S. markets traded lower Tuesday — though futures rose amid the strong results from Alphabet and Microsoft. European markets mostly fell too. The Stoxx 600 index declined 0.4%, dragged by mining, banking and construction stocks.
- U.S. President Joe Biden officially announced he'd be running for reelection in 2024. Biden might face some resistance: An NBC News poll released Sunday found 70% of Americans believe he shouldn't seek a second term.
- PROÂ Artificial intelligence-focused stocks are set for a period of extreme growth, according to Adam Parker, founder and CEO of Trivariate Research and previously Morgan Stanley's chief U.S. equity strategist. Here are 25 stocks that can capitalize on the A.I. boom, with 15 of them up 20% year to date.
The bottom line
Can optimism in tech save markets from resurgent bank fears?
Investors must have felt an unwelcome sense of déjà vu. First Republic lost almost half its value in a single trading day, dragging down other regional banks. Western Alliance Bancorp lost 5.58%, Charles Schwab fell 3.93% and PacWest Bancorp sank 8.92% (though the Los Angeles-based bank managed to recoup its losses in overnight trading after reporting its earnings).
Bigger banks weren't spared, either: The broader SPDR S&P Bank ETF lost 3.68%. Across the Atlantic, UBS shares dropped even though the Swiss bank managed to increase assets in March, suggesting investors are still jumpy at any sign of weakness in banks.
Losses in the financial sector weighed on major stock indexes. The Dow Jones Industrial Average slid 1.02%, the S&P 500 ended the day 1.58% lower and the Nasdaq Composite lost 1.98%.
However, Wednesday could look like a very different trading day in the United States. Investors were pleased with how both Alphabet and Microsoft managed to beat estimates on profit and revenue. Shares of those tech giants popped in extended trading and are likely to post more dramatic surges later today. Given Alphabet's and Microsoft's immense market capitalization, broader markets stand to benefit from their rise as well.
If Meta, which is due to report after the bell Wednesday, continues the streak of big tech surpassing Wall Street's expectations, investors could be in for two good trading days for the Nasdaq, at the very least. That could be enough to banish any lingering sense of déjà vu surrounding banks.
Subscribe here to get this report sent directly to your inbox each morning before markets open.
Correction: This story has been updated to remove an inaccurate reference to the name of Google's cloud service.
