Markets tumble as First Republic troubles rekindle bank worries

Dow dropped 344 (session lows), decliners over advancers a very big 5-1 & NAZ sank 238.  The MLP index was off 2+ to the 223s & the REIT index fell 3+ to 365.  Junk bond funds continued to be sold & Treasuries saw very heavy buying reducing the yield on the 10 year Treasury by 13 basis points to 3.39%.  Oil was off 1+ to the low 77s & gold added 9 to 2008 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Free Apple Analysis!

Bring Your Portfolio Into The 21st Century

Four Days, Four Trades, +40% Average Returns
Learn to trade options with MarketClub!

Shares of First Republic fell sharply & hit a record low today, as investors questioned how the bank would stabilize itself after losing about 40% of its deposits during Q1.  The stock fell more than 40% today, extending its YTD losses beyond 90% & hit a record intraday low at $8.27.  The decline comes after the bank's Q1 earnings report, which showed that its deposits shrank by 40.8% during the qtr as customers pulled out their money following the collapse of 11 larger banks that were meant to stabilize the broader financial system.  Excluding those funds, First Republic's net outflows would have topped $100B.  The bank said that it was “pursuing strategic options” to reshape its balance sheet after the massive deposit flight. The next few days are crucial for First Republic's future as other banks & federal officials looking for solutions to stabilize the regional bank.  First Republic was looking to sell up to $100B of loans & securities to restructure its balance sheet.  FRC closed at 7.24, down a whopping 7,73.

First Republic falls more than 40% to record low

UPS (UPS) reported Q1 misses on both earnings & revenue.   To some analysts, the relatively weak report from UPS hints at a wider economic slowdown, particularly when coupled with CEO Carol Tomé's comments.  “In the first quarter, deceleration in U.S. retail sales resulted in lower volume than we anticipated, and we faced ongoing demand weakness in Asia,” Tomé said.  “Given current macro conditions, we expect volume to remain under pressure.”   Revenue fell 6% from the same qtr last year, while consolidated operating profit fell 21.8% compared to Q1-2022, down 22.8% adjusted.  The  company had previously predicted its 2023 profit margin would be tighter following a record profit in 2022.  In its Q1, the companyexpects its full-year earnings to fall within the low end of its initial outlook, citing “challenging macro conditions and changes in consumer behavior.”  The company now expects full-year revenue of $97B.  Previously, UPS projected revenue $97-99.4B, versus analyst estimates of $99.98B.  CCFO Brian Newman said the company expected 2023 “to be a bumpy year.”  The company has seen volume fall in light of cooling demand & formerly said it expects the majority of its profit to arrive in H2-2023.  The first-Q1report comes amid a period of high-stakes workforce discussions at UPS.  Contract negotiations between the company & its unionized workforce kicked off earlier this month, marking the largest private collective bargaining agreement in the US.  The Teamsters union involved in the negotiations represents more than 340K UPS workers & the Teamsters have publicly pledged to strike if they're unable to reach a satisfactory contract with UPS.  The current national contract is set to expire on Jul 31.  Tomé previously said that she believes negotiations will conclude before the end of Jul.  The Teamsters have said they are looking for higher wages, more manageable shifts & improved safety measures, among other demands.  The stock sank 19.56 (10%).
If you would like to learn more about UPS, click on this link:
club.ino.com/trend/analysis/stock/UPS_aid=CD3289&a_bid=6aeoso5b6f7

UPS shares fall after delivery giant reports disappointing earnings

General Motors (GM) raised key guidance for 2023 after reporting Q1 results that topped top- & bottom-line forecasts.  For the full year, GM is raising its adjusted earnings expectations to $11-13B ($6.35-7.35 a share) up from a previous range of $10.5-12.5B ($6-7 a share).  GM also raised expectations for adjusted automotive free cash flow to $5.5-7.5B, up from an earlier forecast of $5-7B.  GM lowered its guidance, however, for net income attributable to stockholders due to $875M in special charges related to a previously announced employee buyout program during the qtr.  The new range is $8.4 - 9.9B, down from $8.7 - $10.1B.  GM said revenue during the first 3 months of this year was up 11.1% from roughly $36B a year earlier.  Net income during Q1, however, was down by roughly 18% to $2.3B compared to a year earlier.  CFO Paul Jacobson said the company felt confident in raising its adjusted earnings guidance after Q1 results came in above internal expectations, including continued demand for high-end models.  Cost-cutting efforts such as the employee buyout program also impacted results faster than expected, he added.  The employee buyouts, which saw more than 15% of its global executives opt in, were part of GM's plan announced earlier this year to cut $2B in structural costs by the end of 2024.  Jacobson reiterated that additional cost-savings will come by reducing complexity across its business, prioritizing growth initiatives & cutting other expenses such as marketing.  CEO Mary Barra also highlighted turnarounds in the company's intl operations, excluding China, which has experienced significant declines in recent years.  GM's equity income from China was $83M during Q1, off 64.5% from a year earlier.  Its other intl operations increased earnings by 5.8% to $347M.  North America generated roughly $3.6B for the automaker to begin the year, up by 13.8% from Q1-2022.  The stock fell 1.39.
If you would like to learn more about GM, click on this link:
club.ino.com/trend/analysis/stock/GM_aid=CD3289&a_bid=6aeoso5b6f7

General Motors raises 2023 guidance as first-quarter earnings beat expectations

Gold futures climbed to finish back above $2000 an ounce after settling below that key mark for the past 2 trading sessions.  If this week's US economic data or next Wed's Federal Reserve decision challenge the consensus forecast that rate cuts will start in the summer, gold is more likely to fall than set a fresh high against the dollar.  However, gold priced in other currencies is holding firm today & that shows how the underlying direction continues to point higher.  Gold for Jun rose $4 to settle at $2000 an ounce.

Gold Futures Rise Back Above $2,000 an Ounce

Oil futures ended more than 2% lower, with concerns over the outlook for energy demand in focus.  Energy traders aren't buying this dip in prices until they have clear signs that the sky has stopped falling.  Concerns about China's recovery aren't going away until there are strong signs crude demand is improving.  Jun West Texas Intermediate crude declined by $1.69 (2.2%) to settle at $77.07 a barrel.

Oil Prices Settle with a Loss of more than 2%

Dow began trading with modest loss.  Then the bears led the midday selloff & did more damage in the PM.  Earnings reports are not bringing joy to investors.  The latest reports about First Republic's problems made matters worse.  In addition, lower yields are making it difficult for the Fed to start thinking about rate cuts.  These are tough times for the stock market as shown below.

Dow Jones Industrials