Wall Street’s major averages closed lower on Tuesday as a downbeat UPS forecast exacerbated investor concerns about a slowing U.S. economy, while plunging deposits at regional First Republic Bank added to jitters about the bank sector’s health.
United Parcel Service Inc (UPS.N) shares tumbled after the courier company forecast full-year revenue at the lower end of its earlier outlook as it navigates a weakening economy.
This helped push down UPS rival FedEx Corp (FDX.N). The Dow Jones Transport Average index (.DJT) also lost ground.
This added to worries for investors awaiting quarterly results from megacap companies including Microsoft Corp (MSFT.O). Also of concern was Tuesday’s data showing U.S. consumer confidence fell to a nine-month low in April.
“Investors have been trying valiantly to hold it together in the midst of a big earnings and economic data week and a big Federal Reserve week next week,” said Carol Schleif, chief investment officer for BMO Family Office based in Chicago.
Traders largely expect the central bank to hike rates by 25 basis points on Wednesday after its Federal Open Market Committee meeting.
Also, lawmakers in Washington appeared to be in a stand-off over raising the government’s $31.4 trillion debt ceiling.
“Anytime you hear about a potential default that would trigger a risk-off environment. If we go to the brink and even beyond that wouldn’t bode well for risk assets or consumer confidence,” said Brian Price, head of investment management for Commonwealth Financial Network in Boston.
According to preliminary data, the S&P 500 (.SPX) lost 65.29 points, or 1.58%, to end at 4,071.75 points, while the Nasdaq Composite (.IXIC) lost 238.05 points, or 1.98%, to 11,799.16. The Dow Jones Industrial Average (.DJI) fell 341.70 points, or 1.01%, to 33,531.72.
The KBW Regional Banking index (.KRX) dropped along with the broader S&P 500 bank index (.SPXBK) while First Republic (FRC.N) shares hit a record low.
The beleaguered lender reported a more than $100 billion flight in deposits in the first quarter following the biggest banking crisis since 2008 last month.
“People are trying to figure out the health of the regional banks in general. Is there a canary in the coal mine? It’s really important for mid-size businesses in the country that the regional banks stay healthy,” said BMO’s Schleif.
While estimates for first-quarter S&P 500 earnings narrowed to a 3.9% decline from expectations on April 1 for a 5.1% decline, according to Refinitiv, some of the biggest companies have yet to report results.
Shares in Alphabet Inc (GOOGL.O) and Microsoft slipped ahead of their quarterly results due after the market close.
“We’re in the heart of earnings season and it’s been fairly underwhelming,” said Commonwealth’s Price.
Shares in medical technology firm Danaher Corp (DHR.N) fell sharply after it cut its annual sales growth forecast due to weakness in its biotechnology business.
General Motors Co (GM.N) shares fell after the automaker cautioned that 2022 price gains will not last as the year goes on, even as it lifted full-year profit and cash flow forecasts.
On the bright side, PepsiCo Inc (PEP.O) shares rose after it raised its annual revenue and profit forecasts.
Benchmark 10-year Treasury yields fell by their largest amount since March while short-term yields climbed as investors balanced concerns about regional banks and the possibility of a recession with worries about the U.S. debt ceiling.
Here is a graphic of earnings estimates and reports so far: