First Republic Bank troubles outweigh excitement around big tech earnings

The Dow Jones Industrial Average lost more than 200 points as investors’ worries around First Republic overpowered their excitement around Big Tech earnings.

The blue-chip index declined 0.68 per cent, after trading up more than 100 points earlier in the session. The technology-heavy Nasdaq Composite added 0.47 per cent, trimming gains after jumping as much as 1.4 per cent. The S&P 500 slid 0.38 per cent.

First Republic Bank slid more than 33 per cent, extending losses after falling almost 50 per cent on Tuesday. The regional bank said late Monday that its deposits dropped 40 per cent to $104.5 billion in the first quarter. Investors are worried about the cost of the bank’s funding. It borrowed about $92 billion from the Federal Reserve and government-backed lending groups, like Federal Home Loan Banks. The problem is that the loans come at a higher cost than customer deposits, and the bank is unable to use the funds to do business, as it could with customer deposits.

In tech news, Microsoft climbed more than 7 per cent to trade at its highest point in more than a year after beating Wall Street’s expectations on the top and bottom lines in its latest quarter.
However Britain’s mergers regulator today blocked Microsoft’s $69 billion takeover bid for Activision Blizzard, ruling that buying the maker of “Call of Duty” would give the tech giant too much control of the thriving market for cloud-based video games.

And in after market trading Meta stock has jumped nearly 10 per cent on revenue beat and better-than-expected forecast the company issues revenue for the first quarter that topped estimates and provided optimistic guidance for the current period.

Amazon rose more than 2 per cent as some market participants grew hopeful that the e-commerce giant’s cloud business could also show strong revenue growth.

Elsewhere, Chipotle shares jumped more than 13 per cent to an all-time high on the back of strong earnings.

And it looks like the SPAC boom is over – while the special purpose acquisition companies took hundreds of risky companies to the stock market. The next stop for many is bankruptcy court. Dozens of companies that merged with SPACs are running out of cash, joining at least 12 that have already gone bankrupt. More than 100 companies, are running out of cash, according to a Wall Street Journal analysis of the companies’ cash and cash flow from operations data disclosed in regulatory filings. Shares of many of these companies trade under $1, more than 90 per cent below where they did when they went public, and are in danger of being delisted. Those that have raised cash typically have done it on onerous terms.

Overnight, all S&P500 sectors finished lower except Tech, off the back of positive results from the sectors bellwethers, whilst Utilities lagged behind.

Futures

The SPI futures are pointing to a 0.3 per cent fall.

Currency

One Australian dollar at 7:10 AM is buying 66.02 US cents..

Commodities

Iron ore futures are pointing to a 2.32 per cent gain.

Gold lost 0.42 per cent. Silver fell 0.07 per cent. Copper shed 0.09 per cent and oil dropped 3.59 per cent.

Figures around the globe

Across the Atlantic, European markets closed lower. London’s FTSE lost 0.49 per cent, Frankfurt fell 0.48 per cent while Paris closed 0.86 per cent lower.

In Asian markets, Tokyo’s Nikkei lost 0.71 per cent, Hong Kong’s Hang Seng added 0.71 per cent and China’s Shanghai Composite closed flat.

Yesterday, the Australian sharemarket closed 0.08 per cent lower at 7313.

Ex-dividends

Acrow Formwork (ASX:ACF) is paying 1.7 cents 85 per cent franked
Gryphon Capital (ASX:GCI) is paying 1.31 cents unfranked
Steamships Trading (ASX:SST) is paying 25.2712 cents unfranked
360 Capital Ei Fund (ASX:TCF) is paying 3.5 cents unfranked

Dividends payable

360 Capital REIT (ASX:TOT)
Clover Corp (ASX:CLV)
Ridley Corp (ASX:RIC)
Turners Automotive Group (ASX:TRA)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

Disclaimer

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