- US stocks fell about 1% on Tuesday as investors prepare for another interest rate hike despite an ongoing banking crisis.
- The Federal Reserve is expected to hike interest rates by 25 basis points at its Wednesday FOMC meeting.
- Regional bank stocks were crushed on Tuesday just one day after JPMorgan acquired First Republic Bank.
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US stocks fell about 1% on Tuesday as traders prepared for another 25-basis-point interest rate hike from the Federal Reserve at its May FOMC meeting on Wednesday.
Perhaps more importantly, investors will be looking to Fed Chairman Jerome Powell’s press conference for any clues that a pause in future rate hikes is imminent, especially after First Republic Bank became the third bank to collapse in recent months.
Regional bank stocks were crushed on Tuesday, with the S&P Regional Banking ETF falling more than 6% as investors grow concerned that another lender could collapse after the Fed’s aggressive tightening cycle created sizable, unrealized losses on bank bond holdings.
Investors also have their eyes on corporate earnings, with Apple set to report quarterly results after the market close on Thursday.
So far, earnings have held up better than analyst estimates. With 57% of S&P 500 companies having already reported, 80% are beating profit estimates by a median of 8% while 74% are beating revenue estimates by a median of 3%, according to Fundstrat.
Here’s where US indexes stood at the 4:00 p.m. ET close on Tuesday:
- S&P 500: 4,119.58, down 1.16%
- Dow Jones Industrial Average: 33,684.53, down 1.08% (367.17 points)
- Nasdaq Composite: 12,080.51, down 1.08%
Here’s what else happened today:
- Robinhood mistakenly told its users that AMC Entertainment had filed for bankruptcy Monday, drawing the ire of the theater chain’s boss.
- Citigroup CEO Jane Fraser said the worst of the ongoing banking uncertainty is likely over after JPMorgan struck a deal to take over First Republic Bank.
- Economist Mohamed El-Erian warned of “collateral damage” from JPMorgan’s takeover of First Republic and said there could be four unintended consequences of the deal.
- Apple’s high-yield savings account attracted as much as $990 million in deposits in the first four days of its launch.
- Chegg stock crashed as much as 49% on Tuesday after the company said that OpenAI’s ChatGPT is increasingly being used by students for homework help.
In commodities, bonds and crypto:
- West Texas Intermediate crude oil fell 5.34% to $71.62 per barrel. Brent crude, oil’s international benchmark, dropped 5.04% to $75.31.
- Gold rose 1.71% to $2,026.20 per ounce.
- The yield on the 10-year Treasury tumbled 14 basis points to 3.43%.
- Bitcoin jumped 2.29% to $28,728, while ether rose 2.21% to $1,872.