US Stocks Tumble, VIX Spikes Ahead Of Mega-Tech Earnings; Investors Flock To Treasuries But Bond Market Says Something Will Break Soon...

Author: Shanthi Rexaline | April 25, 2023 02:28pm

A generalized risk-off, with investors fleeing equities and rushing to safe havens, marked Tuesday's session, as investors await the release of earnings from tech titans like as Alphabet, Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and Microsoft Corp. (NASDAQ:MSFT) after market close.

The VIX fear index gained 8% on the day, while Treasuries drew demand from investors fleeing riskier assets, with rates falling on the key maturities and the 10-year hitting a 3.4% intraday yield.

However, the yield gap between 3-month and 6-month treasuries, which has historically been relatively narrow in normal circumstances, expanded once again to about 20 basis points on Tuesday, indicating growing expectations that a Fed policy shift might occur shortly.

Cues From Tuesday's Trading:

All major U.S. equity indices traded in the red, with tech and small-caps underperforming large-cap stocks.

The S&P 500 fell 0.8%, the Nasdaq 100 dropped 1% while the Dow Jones Industrial Average eased 0.5%. Small caps in the Russell 2000 index fared worse, down 1.4%.

U.S. Indices' Performance On Tuesday
Index	Performance (+/-)	Value
Nasdaq 100	-1%	12,834.10
S&P 500 Index	-0.8%	4,101.04
Dow Industrials	+0.20%	33,723.50

Analyst Color:

Earnings, durable goods orders report, and the Treasury yields are among the key catalysts that can lend direction to the market this week, said fund manager Louis Navellier.

He noted that 14 Dow components and 180 S&P 500 companies are due to release their quarterly results this week. If the Treasury yields rise this week, the Fed will be more likely to raise the Fed funds rate at the Federal Open Market Committee meeting scheduled for May 2-3, he said.

Navellier also sees a split vote at the May meeting. “Due to mixed signals coming from different Fed districts, I think a split vote might be forthcoming at the May FOMC meeting,” he said.

Tuesday's Trading In Major US Equity ETFs:

In midday trading on Tuesday, the SPDR S&P 500 ETF Trust (NYSE:SPY) was 0.8% lower to $409.22, the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) weakened by 0.4% to $337.34 and the Invesco QQQ Trust (NASDAQ:QQQ) was 1% lower to $312.7, according to Benzinga Pro data.

Among U.S. equity sectors, cyclicals largely underperformed versus defensive. The Metals and Mining Select Sector SPDR Fund (NYSE:XME) was the worst-performing sector on the day, falling 3%, followed by Energy Select Sector SPDR Fund (NYSE:XLE), down 1.9%, the Materials Select Sector SPDR Fund (NYSE:XLB), down 1.6% and the Technology Select Sector SPDR Fund (NYSE:XLK), down 1.4%. The Consumer Staples Select Sector SPDR Fund (NYSE:XLP) and the Utilities Select Sector SPDR Fund (NYSE:XLU) were the only two sectors in the green, both up by 0.4%.

Latest Economic Data:

The S&P/Case-Shiller Home Price index rose 0.2% in February, defying expectations of a 0.7% decline. In annual terms, the index rose 0.4%, topping forecasts of a flat reading.

The Conference Board Consumer Confidence index, a key leading indicator for consumption activity, dropped from 104 in March to 101.3 in April, below than estimates of 104.

The U.S. Census Bureau reported that new home sales unexpectedly surged 9.6% in March to 0.683 million units, topping expectations of a 1.1% increase to 0.63 million units.

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Stocks In Focus:

First Republic Bank (NYSE:FRC) shares tumbled nearly 30% reacting to the company’s quarterly results.
Swiss investment bank UBS Group AG (NYSE:UBS) fell over 1.50% after the bank’s profitability was dented by higher provisioning for losses.
3M Co. (NYSE:MMM) was flat in a highly volatile session after the business reported better-than-expected results in the quarter.
Verizon Communications, Inc. (NYSE:VZ) and PepsiCo. (NYSE:PEP) both reported better-than-expected EPS, but missed revenue expectations.
McDonald’s Corp. (NYSE:MCD) and General Motors Corp. (NYSE:GM) both topped EPS and revenue projections.
Spotify Technology SA (NYSE:SPOT) disappointed expectations both in terms of sales and earnings.
Boyd Gaming Corp. (NYSE:BYD), Microsoft, Alphabet, Texas Instruments, Inc. (NASDAQ:TXN) and Visa, Inc. (NYSE:V) are among the companies reporting after the market close.

Commodities, Bonds, Other Global Equity Markets:

Crude oil fell 1.5%, with a barrel of WTI-grade crude dropping to $77.45. The United States Oil Fund ETF (NYSE:USO) was 1.7% lower to $68.08 per share.

Treasury yields plummeted, with the 10-year yield falling by 7 basis points to 3.42% and the two-year yield down 4 basis points to 4.05%. The iShares 20+ Year Treasury Bond ETF (NYSE:TLT) was 1.3% higher on the day.

The dollar strengthened, with the U.S. dollar index, which is tracked by the Invesco DB USD Index Bullish Fund ETF (NYSE:UUP), up 0.6%. The EUR/USD pair, which is tracked by the Invesco CurrecyShares Euro Currency Trust (NYSE:FXE), fell 0.7% to 1.0967.

European equity indices fell across the board. The iShares MSCI Eurozone ETF (NYSE:EZU) dropped 1.4%.

Gold held steady at $1,988/oz. The SPDR Gold Trust (NYSE:GLD) was flat at $184.8. Silver fell 1.6% to $24.71, with the iShares Silver Trust (NYSE:SLV) falling 0.7% to $22.7 per share. Bitcoin (CRYPTO: BTC) fell 0.4% to $27,408.

Staff writer Piero Cingari updated this report midday Tuesday.

Photo: Shutterstock

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