Will America’s Next Bank Fail?  Wall Street doesn’t care

Shares of First Republic Bank fell more than 43% on Friday. Since the beginning of the year, the capitalization of this California bank has been reduced by as much as 97%. In practical terms, this means that the market is expected to be liquidated by the FDIC, as was the case in March with Silicon Valley Bank and Signature Bank. A decision is expected at the end of this week.

However, the broader stock market did little to escalate the US banking crisis. In general, the “significant index” large banking stocks closed the day lower. It is the same as the New York Three Major Indices.

The S&P500 rose 0.83% and ended the month at 4,169.48 points. The Dow Jones rose by 0.80% and reached the level of 34,098.16 points. The Nasdaq index rose 0.69%, to end Friday’s session at 12,226.58 points.

The entire month of April was moderately successful for US equity holders. The S&P500 is up 1.5%, the DJIA is up 2.5%, and the Nasdaq has rallied after a very successful March (up 6.7%).

Exxon Mobil stock reached a new all-time high after reporting strong first-quarter earnings. Benefiting from higher fuel prices, the oil giant posted a net profit of $11.4 billion, or $2.79 per share, beating market expectations by 9%.

Intel shares jumped 4 percent after the processor maker said it would increase gross margin in the second half of the year. On the other hand, Amazon’s share price fell by about 4%. Investors didn’t like the company’s warnings that the growth of the “cloud” business could slow.

Overall, US corporate results were much better than expected at the beginning of April. According to Refinitiv data, analysts estimate that corporate earnings attributable to the S&P500 are less than 2% lower than they were a year ago. At the beginning of the month, a 5-6% year-on-year decline was expected.

Mixed data came from the US economy. US spending in March remained at the same nominal level as in February (a cosmetic decline of 0.1% m/m was expected), and PCE inflation fell from 5.1% to 4.2%. Just that the core consumer expenditure (PCE) deflator only fell from 4.7% to 4.6%, despite an expected 4.5%. The core of personal consumption expenditures is the preferred measure of inflation by Fed officials. The Chicago PMI unexpectedly improved, rising from 43.8 points to 43.8 points. (Deep recession level) to 48.6 points. (ie still declining) with forecasts at 43.5 points.

With all that said, the futures market is pricing in an 85% chance of a 25-point hike in the federal funds rate at next week’s FOMC meeting. According to market speculation, this will be the last rise in the cycle, and the decline is expected to lead to reductions in the Fed’s borrowing cost.


Christopher Colany

Senior Analyst at Bankier.pl

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