Can optimism in tech save markets from resurgent bank fears?
Investors must have felt an unwelcome sense of déjà vu. First Republic lost almost half its value in a single trading day, dragging down other regional banks. Western Alliance Bancorp lost 5.58%, Charles Schwab fell 3.93% and PacWest Bancorp sank 8.92% (though the Los Angeles-based bank managed to recoup its losses in overnight trading after reporting its earnings).
Bigger banks weren't spared, either: The broader SPDR S&P Bank ETF lost 3.68%. Across the Atlantic, UBS shares dropped even though the Swiss bank managed to increase assets in March, suggesting investors are still jumpy at any sign of weakness in banks.
Losses in the financial sector weighed on major stock indexes. The Dow Jones Industrial Average slid 1.02%, the S&P 500 ended the day 1.58% lower and the Nasdaq Composite lost 1.98%.
However, Wednesday could look like a very different trading day in the United States. Investors were pleased with how both Alphabet and Microsoft managed to beat estimates on profit and revenue. Shares of those tech giants popped in extended trading and are likely to post more dramatic surges later today. Given Alphabet's and Microsoft's immense market capitalization, broader markets stand to benefit from their rise as well.
If Meta, which is due to report after the bell Wednesday, continues the streak of big tech surpassing Wall Street's expectations, investors could be in for two good trading days for the Nasdaq, at the very least. That could be enough to banish any lingering sense of déjà vu surrounding banks.
Correction: The earlier, APAC edition of today's newsletter had an inaccurate reference to the name of Google's cloud service. That error has been corrected in this edition.
