April 26, 2023
Good morning,
For equities, yesterday’s pop in volatility, a euphemism for sell-off, was perhaps overdue. We’ve been talking about the almost eerie calm in equities for weeks, given that risks of a recession appear to abound. Stocks fell sharply yesterday; the major indexes had their worst day in at least a month – the S&P 500 was off -1.6% while the tech heavy Nasdaq Composite fell -2%.
The primary catalyst for the sell-off was First Republic Bank (FRC). In its earning announcement Monday night, the bank revealed just how bad things were for it back in March – it was teetering (and may still be) despite a $30 billion cash infusion. Markets trading in tight trading ranges for unusually long periods might be considered fragile. The regional bank sector declined 5% yesterday on renewed concerns of instability for the group. FRC’s stock price was cut in half yesterday, and it’s enough for a fragile market to hit the eject button.
It is unlikely that regional bank concerns are over for the market, but a -1.5% one-day decline may seem like a decent discount for now. Markets are not seeing yesterday’s sell-off continuing today. Big tech, in the way of Microsoft (MSFT) and Alphabet (GOOG), delivered better quarterly results last night than expected and it seems that it is enough good news for now to offset yesterday’s concerns. Futures are up about +.30% ahead of the cash market open.
Be well,
Mike