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

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

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

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

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

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.

— Hakyung Kim, Nicholas Wells

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

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

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

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

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

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.

— Alex Harring

Shares of First Republic continue to fall in afternoon trading. They were last down 44% and trading under $9 per share before trading was halted for volatility.

The bank said in its earnings release on Monday that it is considering strategic moves to help restructure its balance sheet. CNBC's David Faber reported earlier Tuesday that the next several days were key for the bank as it tries to reconcile a mismatch between its deposits and assets.

— Jesse Pound

Shares of egg production company Cal-Maine Foods tumbled almost 4% after Stephens stepped to the sidelines on shares. The firm cited a weak pricing backdrop in the eggs and chicken sector. 

Analyst Ben Bienvenu downgraded the stock to equal weight from overweight. He also lowered his price target to $60 from $67, which implies 15% upside from where shares closed on Monday. 

"When considering what's currently playing out for eggs, we think it is best for us [to] move to the sidelines on Cal-Maine as we think risk/reward is now more balanced," said Bienvenu. 

"Egg prices have moved down rapidly since the end of the rally we saw in prices a month ago, and as we move into a seasonal demand lull, deferred flock rotations are likely to be just around the corner. While this could help stabilize prices in the coming weeks, we think it is too little too late relative to current expectations from investors in the table egg space," the analyst added.

— Hakyung Kim

Utility and consumer staple stocks were able to buck the S&P 500's slide on Tuesday.

Of the index's 11 sectors, the two were the only ones trading in the green with advances of around 0.3%. The other nine sectors traded in the red, pulling the broad index down 0.9%.

Energy was the worst performer of the 11 sectors with a loss of 1.8%.

— Alex Harring

Shares of shipping giant UPS fell 8.8% shortly after the opening bell on Tuesday. The sharp decline puts the company on track for its worst trading day since October of 2020.

The company reported quarterly results on Tuesday, which disappointed investors on lower volume and revised forward guidance for the rest of the year.

— Brian Evans

The growth of the popular card game Magic: The Gathering could help stoke growth at Hasbro, according to Jefferies.

Jefferies analyst Andrew Uerkwitz lauded Wizards of the Coast, the company that oversees MTG and subsidiary of Hasbro, for expanding the game's roster of products for extending into a diverse set of verticals in a Tuesday note.

"Expanding MTG's media presence with TV, video games, and social media content creators are ways we expect WOTC to increase touch-points with both new and returning consumer," Uerkwitz said.

Read the full story here.

— Brian Evans

Shares of First Republic extended their losses to more than 27% on Tuesday morning as investors reacted to a larger-than-expected decline in deposits at the troubled regional bank.

The stock is now down more than 90% year to date.

The stock also set a new intraday low for the year at $11.20 per share. The previous low water mark was $11.52 per share on March 20, according to FactSet.

— Jesse Pound

Legendary investor Peter Lynch said Tuesday that he wished he hadn't missed out on the explosive growth in Apple.

"Apple was not that hard to understand. I mean, how dumb was I?" Lynch, vice chairman of Fidelity Management & Research, said on CNBC's "Squawk Box." Apple has a "nice balance sheet. I should have done some work on Apple ... it's not a complicated company."

Lynch made his name for managing Fidelity's Magellan Fund from 1977 to 1990. Under his 13-year management, the fund earned an annualized return of 29.2%, consistently more than doubling the S&P 500′s performance.

— Yun Li

New home sales unexpectedly increased in March despite persistently high mortgage rates.

With rates above 7% for a 30-year mortgage, sales still totaled 683,000, an increase of 9.6%, according to seasonally adjusted data Tuesday from the Commerce Department . Economists surveyed by Dow Jones had been looking for sales of 634,000, which would have equated to a decline of nearly 1% from the February total.

The number of homes for sale totaled 432,000, equating to about 7.6 months worth of supply.

Despite the rise in home sales, the Conference Board's Consumer Confidence Index fell to 101.3 for April, down from 104 in March, which also was the expected level for April.

—Jeff Cox

The Global X Cybersecurity ETF (BUG) lost 3.4%, putting the fund on pace for its worse day since January.

It last performed worse on Jan. 5, when the ETF dropped 4.8%.

Tenable led the index down with a drop of more than 21% followings its earnings report. The stock is on pace for its worse day ever — all the way back to its initial public offering on July 26, 2018.

Qualys trailed with a nearly 7% slide, followed by CyberArk Software, Zscaler and Telos with drops of more than 5%.

— Alex Harring, Gina Francolla