Apple reports next week, with some eyes on its move into financial services as it muscles in on high-yield savings accounts that pander to jittery depositors.
Judged by another near 50% drop in First Republic’s already battered shares on Tuesday – amid reports of asset sales to fill the $100 billion hole in deposits that it reported from the March blowup – that banking instability smoulders.
But despite the fresh wobble across banking indices on Tuesday, it wasn’t all bad news in the sector.
PacWest Bancorp’s shares jumped 15% in extended trading after the regional lender said deposits have been building recently. And in Europe, Standard Chartered shares bucked otherwise dour markets on a forecast-beating 21% jump in first-quarter profits.
And while the blizzard of corporate earnings this week makes it hard to see the wood for the trees, the aggregate readout on first quarter S&P500 earnings shows almost 80% of firms beating forecasts so far and the estimated annual profit contraction ebbing to 3.9% from more than 5% earlier this month.
The relatively mixed picture was also reflected in the incoming macro numbers – where a drop in April consumer confidence contrasted with further signs of a rebound in housing.
Overall, the news saw S&P500 futures gain 0.5% before the bell – recouping some of Tuesday’s 1.5% drop and offsetting modest losses on many Asian and European bourses.
Simmering nerves about the looming U.S. debt ceiling standoff persisted, however, with Treasury Secretary Janet Yellen again warning of ‘economic catastrophe’ if the debt cap is not lifted and U.S. sovereign credit default swaps creeping higher.
The U.S. House of Representatives could on Wednesday vote on a bill to sharply cut spending for a decade in exchange for a short-term hike in the debt ceiling, though it is unclear if it has enough support in the Republican majority to pass.
The implications of Republicans being unable to agree a bill that even gets through the House – as it will likely fail in a Democrat-led Senate anyway – offers markets the prospect of the debt ceiling being hit without any real negotiations, leaving it down to a thin Republican majority in the house whether to force a crisis or vote to lift the cap and fight another day.
U.S. Treasury markets continued to rally, with yields on 2-year notes dropping below 4% Tuesday and testing 3.9% early today. With the bank reverberations and debt ceiling uncertainty in the background, near certainty on one more Federal Reserve interest rate rise next month weakened at bit too – as futures cut the chances of another quarter-point hike to 80%.
The dollar fell back across the board.
