Wall St falls on mixed earnings, First Republic sinks to all-time low

By Sruthi Shankar and Ankika Biswas

(Reuters) – U.S. stocks fell on Tuesday after a mixed batch of earnings reports, while a plunge in deposits of regional lender First Republic Bank (NYSE:) stoked concerns about the banking sector.

First Republic shares tanked 28.9% to a record low after 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.

Other regional banks PacWest Bancorp and Western Alliance (NYSE:) Bancorp fell 5.6% and 3.7%, respectively.

The KBW Regional Banking index dropped 1.5% to a more than two-year low and was on track for a 23% decline this year as the collapse of two mid-sized lenders last month wreaked havoc on the banking sector.

Some bigger U.S. banks including Bank of America (NYSE:) and JPMorgan Chase & Co (NYSE:) lost around 1%, with the bank index shedding 1.2%.

“Rising interest rates are worrying depositors that small- and mid-sized lenders are going to be facing increasing difficulties, that their business models are too heavily dependant on a low interest rate environment,” said Stuart Cole, head macro economist at Equiti Capital.

“The risk is that the cost of emergency funding proves too expensive for the smaller banks and the market deems them to be no longer profitable.”

Investors are also concerned about the impact of elevated inflation and aggressive interest rate hikes by the Federal Reserve on companies’ margins.

PepsiCo (NASDAQ:) Inc rose 2% after raising its annual revenue and profit forecasts.

United Parcel Service Inc (NYSE:) slid 8.4% after the delivery firm forecast full-year revenue to be at the lower end of its earlier estimate as it grapples with a weakening economy. Peer FedEx Corp (NYSE:) lost 2.1%.

The Dow Jones Transport Average index slumped 2.5%.

In a busy week for earnings, 178 of the S&P 500 companies are expected to report first-quarter results. Analysts have largely maintained their forecast of a near-5% drop in first-quarter profit for S&P 500 companies, according to Refinitiv data.

Earnings from trillion-dollar companies Alphabet (NASDAQ:) Inc and Microsoft Corp (NASDAQ:) are due after market close on Tuesday.

At 9:43 a.m. ET, the was down 21.15 points, or 0.06%, at 33,854.25, the S&P 500 was down 15.10 points, or 0.36%, at 4,121.94, and the was down 51.11 points, or 0.42%, at 11,986.10.

Investors are awaiting the Fed’s monetary policy decision in May for signals on the path of interest rates. Traders mostly expect the central bank to hike rates by 25 basis points next week and hold steady before cutting them later this year.

Consumer confidence data for April and new home sales unit data for March are also on tap after the opening bell.

Defensive sectors such as utilities, healthcare and consumer staples were the rare bright spots.

Among others, Spotify Technology SA (NYSE:) climbed 5.6% after first-quarter monthly active users crossed the half-billion mark for the first time, while 3M Co gained 1.1% on the industrial conglomerate’s plans to slash about 6,000 positions globally.

Declining issues outnumbered advancers by a 3.93-to-1 ratio on the NYSE and a 2.41-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and four new lows, while the Nasdaq recorded 21 new highs and 134 new lows.