Stocks supported by mega-cap tech earnings but dragged down by banking woes

• Stocks weighed down on banking jitters
• Fed expectations widely swinging back and forth
• House expected to vote on debt limit today; Senate Dems signaled first major bill dead on arrival

Yesterday, a small little bank was able to take down Wall Street. ​ After the close, a double dose of robust mega-cap tech earnings helped stabilize that ship. Stock traders are breathing a sigh of relief after Microsoft and Google-parent Alphabet tentatively helped alleviate growth concerns and that tech’s strong year-to-date outperformance was over. We still have a lot of earnings to hear from but for now, banking jitters appear to be back. ​

First Republic is fighting for survival as advisors try to get the big banks to give it another helping hand. ​ First Republic’s fate seems doomed as no bank can survive after losing over half their deposits, so the focus will be on which midsized bank is vulnerable to a severe deposit run. ​ The government appears unwilling to intervene and it is hard to see why banks would want to get involved, since they are already getting First Republic’s deposits. ​

War in Ukraine

It took a month, but Chinese President Xi Jinping and Ukrainian President Volodymyr Zelenskiy finally spoke. ​ The West is hopeful China can help broker a peace deal and this may be a positive first step. ​ This was the first time the two leaders spoke since the war in Ukraine began.

US Data

The durable goods order data for March told a disappointing picture when you remove aircrafts. ​ The headline reading impressed with growth of 3.2%, crushing the estimate of 0.7%, and prior -1.2% reading. ​ The key durable goods reading that Wall Street is looking at is the nondefense capital goods ex-aircraft, which fell 0.4%, worse than the expected drop of 0.1%, and matching the downward revised prior of -0.4%. ​ The data looks like it peaked at the beginning of the year and it’s going to continue to soften going forward. ​ Companies are starting to refrain on spending, and no one will be surprised if that becomes more noticeable in the second quarter. ​

FX

The Swedish krona fell to a 2- week low against the euro following  a dovish Riksbank meeting. The Swedish central bank hiked the repo rate by 50bps and raised the terminal rate in staff projections one more.  Highlighting they are likely to hike rates further in June or September. Dissenters sought a 25basis point increase ‘to keep the door open for alternative courses of action later in the year’.

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