So far, first-quarter earnings are beating market fears
Earnings season has kicked off on a positive note, with 10% of the broader index reporting better-than-expected earnings. Of the 53 companies in the S&P 500 reporting so far, 83% have beat Wall Street’s expectations by 6%. Both of those rates are above average.
The broad-based index has seen a modest uptrend in the last few weeks, gaining 7% since it reached a bottom at the height of the banking crisis in mid-March.
— Pia Singh
Fed’s ‘Beige Book’ notes stresses from banking troubles
The banking crisis in March took its toll on financial activity, particularly in the New York and San Francisco regions, according to the Federal Reserve’s periodic economic review released Wednesday.
Since the last release, on Jan. 18, of the Fed’s “Beige Book,” banking and in some cases commercial real estate saw a substantial pullback of activity.” That followed the collapse of Silicon Valley Bank and two other institutions due to a run on deposits.
“Lending volumes and loan demand generally declined across consumer and business loan types” nationally, the report noted.
In the San Francisco area, “Residential and commercial real estate activity fell, and lending activity declined substantially,” while “Lending activity decreased substantially. Communities across the Twelfth District faced heightened challenges in their ability to provide food, shelter, and services due to credit constraints and reduced philanthropic giving.”
In New York, “Conditions in the broad finance sector deteriorated sharply coinciding with recent stress in the banking sector.”
Fed lending facilities put into place have helped stem some of the damage from the failure of SVB and ensuing bank stress.
The report otherwise noted only that overall economic activity was little changed since the last filing.
—Jeff Cox
Technology stocks fall
Technology stocks showed signs of early weakness Wednesday, with the S&P 500’s information technology and communication services sectors housing many popular names last down 0.8% and 1.1%, respectively.
Netflix led some of the sector’s losses, last down 4% as the streaming giant posted mixed results and pushed out plans to mitigate password sharing. The streaming giant was the biggest drag on communications services, followed by Fox and Walt Disney, falling more than 2% each.
Microsoft and Alphabet each declined 1%, while Meta Platforms moved 1.7% lower. Tesla, slated to report earnings after the bell, lost 2.7%.
Amazon was the only major big technology player in the green, last up about 0.6% amid news of job cuts in its advertising unit.
— Samantha Subin
Morgan Stanley shares fall despite better-than-expected results
Morgan Stanley posted earnings per share of $1.70 for the first quarter, greater than the $1.62 estimate from analysts polled by Refinitiv. Overall revenue came in at $14.52 billion, above the $13.92 billion consensus estimate from Refinitiv as equities and fixed income trading units performed better than expected.
One growth area was wealth management, where revenue increased by 11% from a year ago.
The shares, which are outperforming most other banks this year, eased by 2% in early trading despite the positive results.
Morgan Stanley shares, 1 day
“The investments we have made in our wealth management business continue to bear fruit as we added a robust $110 billion in net new assets this quarter,” said Chairman and CEO James Gorman in the earnings release. “Equity and fixed income revenues were strong, although investment banking activity continued to be constrained.”
-John Melloy
