US Stocks Tumble As Banking Stress Persists Ahead Of High-Risk FOMC: Energy Collapses As Oil Dips 5%

Tuesday is a heavy risk-off day on the U.S. stock market, with losses recorded by all major indices and sectors, as tensions in the regional banking industry remain high ahead of a crucial Federal Open Market Committee meeting. 

Cues From Tuesday's Trading:

Fears about the survival of certain regional financial institutions after the Federal Deposit Insurance Corporation-mediated takeover of First Republic Bank by JPMorgan Chase & Co. JPM fueled a broader sell-off. Meanwhile, the latest data signaled that job openings and factory orders came in lower than expected, indicating some cooling in economic activity. Oil fell 5% on demand concerns, weighing on energy-related equities. 

Both the S&P 500 and the Dow Jones Industrial Average dropped 1.4% as of midday, while the tech-heavy Nasdaq 100 eased 1%. Small caps were the underperformer, with the Russell 2000 dropping 2.6%. 

Analyst Color:

Allaying concerns about the market rally fueled by a few stocks, Carson Group’s Ryan Detrick said this happens every year. “Year best performers will always count for most of the gains,” he said.

Highlighting the strength of the current rally, the analyst noted that the Dow advancers/decliners ratio line is at new highs and the S&P 500 Index is close to breaking out.

“This is actually wide participation and always remember that breadth leads price,” Detrick said. “Good chance new highs are coming with A/D lines making new highs.”

Tuesday's Trading In Major US Equity ETFs: In midday trading on Tuesday, the SPDR S&P 500 ETF Trust SPY was 1.5% lower to $409.35, the SPDR Dow Jones Industrial Average ETF DIA fell 1.44% to $335.46 and the Invesco QQQ Trust QQQ was 1% weaker to $318.95, according to Benzinga Pro data.

All of the eleven S&P sectors were in the red for the session, with the Energy Select Sector SPDR Fund XLK the larger underperformer, down by 5%, followed by the Financial Select Sector SPDR Fund XLF down 2.7%, and the Real Estate Select Sector SPDR Fund XLRE down 2.2%. 

Latest Economic Data:

The number of job openings fell by 384,000 in March 2023 to 9.6 million, the lowest level since April 2021 and less than the market's forecast of 9.775 million, signaling that the labor market is cooling.

In March 2023, new orders for manufactured goods grew by 0.9 percent compared to the previous month, reversing a two-month decrease, but lower than the expected 1.1% gain.

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Stocks In Focus:

U.S. Bancorp USB and Citizens Financial Group, Inc. CFG both fell more than 7%, while Capital One Financial Corp. COF fell 4.6% as the sell-off intensified on small and medium banking stocks.

Energy stocks tumbled as oil prices dropped 5%, with energy giants Exxon Mobil Corp. XOM and Chevron Corp. CVX both falling 4.5%. 

• NXP Semiconductors N.V. NXPI climbed over 3.7% after the chipmaker reported its first-quarter results.
• Chegg, Inc. CHGG plummeted over 44% after the tech company hinted at ChatGPT weighing down on its new user growth.
• Pfizer, Inc. PFE fell 1.4% despite reporting better-than-expected results in Q1, as the company signaled cooling demand for Covid-19 products.
• Uber Technologies, Inc. UBER skyrocketed 11% after beating analysts' estimates last quarter. 
• Advanced Micro Devices, Inc. AMD, Ford Motor Co. F, Western Union Company WU and Yum China Holdings, Inc. YUMC are among the key companies reporting after the close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil plummeted 5%, with a barrel of WTI-grade crude dropping to $71.88. The United States Oil Fund ETF USO was 4.7% lower to $63.43 per share.  

Treasury yields fell markedly, with the 10-year yield down by 13 basis points to 3.44% and the two-year yield down 18 basis points to 3.96%. The iShares 20+ Year Treasury Bond ETF TLT was 2.1% higher on the day. 

The dollar slightly weakened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF UUP, down 0.2%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust FXE, was 0.2% higher at 1.10.

European equity indices were negative across the board. The iShares MSCI Eurozone ETF EZU fell 1.4%. 

Gold rose 1.7% to $2,015/oz. The SPDR Gold Trust GLD was 1.8% up to $187.3. Silver also rose 1.5% up to $25.31, with the iShares Silver Trust SLV rising 1.6% to $23.26 per share. Bitcoin BTC/USD rose 1.6% to $28,533.

Staff writer Piero Cingari updated this report midday Tuesday. 

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