US stocks fell for the second straight trading in the new month as investors continued to dump regional banks’ shares ahead of the crucial Fed rate decision. Both PacWest and Western Alliance suffered a sharp selloff, down 28% and 15%, respectively, dragging on the other big bank stocks, such as JPMorgan Chase and Citigroup. In the meantime, the discussion about raising a debt ceiling is running out of time, sparking concerns about US debt default. The Treasury Secretary said the US could run out of cash by 1 June. On the economic front, the US JOLTS job openings fell for the third consecutive month in March, indicating a slowdown in the April non-farm payroll data later this week.
Risk-off again dominated the broad market movements, with haven assets, such as gold, bonds, and the Japanese Yen, soaring while crude oil tumbled more than 4%, sending the Canadian dollar lower. Cryptocurrencies again took a ride on the bank woes, reversing Tuesday’s losses, with both Bitcoin and Ethereum up more than 3%. A notable trend is that funds flow into cash-healthy big companies from debts-burdened smaller businesses. The divergence move signaled mounting recession fears amid the current economic woes.
In Asia, the RBA surprisingly raised the OCR by 25 basis points and signaled more tightening measures to come, taking the ASX 200 down while lifting the Australian dollar. Futures point to a lower open across Asian markets, with the ASX 200 futures down 0.58%, Hang Seng Index sliding 1.07%, and Nikkei 225 futures falling 1.13%.Click to enlarge the table
- Cyclical stocks tumbled on economic concerns, with energy and financial stocks leading losses in the S&P 500, down 4.28% and 2.3%, respectively. 10 out of 11 sectors in the S&P 500 finished lower. Consumer discretionary was the second that finished in the green, up 0.16%. A surge in bond yields also dragged on the real estate sector, which fell 1.73%.
- The chipmaker Advanced Micro Devices Inc’s shares fell 4% in after-hours trading, despite a beat on earning expectations in the first quarter. The company’s revenue fell 9% year over year due to a decline in PC chip sales, along with light guidance of $5.3 billion in revenue for the current quarter. The first-quarter earnings per share was at $0.60 vs. $0.56 expected. And its revenue is at $5.35 billion vs. $5.3 billion estimated.
- USD/JPY reversed most of the gains on Tuesday as Yen strengthened as haven currency, while the USD fell on US debt default concerns. The pair retreated from key resistance of 137.80, down 95 points to 136.57 but still hovering around a two-month high level.
- Crude oil had the worst one-day performance since early May when the SVB’s fallout rattled global markets. The WTI futures slumped to the lowest since late March, reversing all the gains since OPEC+ announced its plan to cut output further as oil markets may have been pricing in a foreseeable economic recession.
- Gold soared to a three-week high as risk-off sentiment renewed the metal’s buying frenzy. Gold price iwill likelyapproach its all-time level of above 2,070 if Fed turns dovish and economic woes continue. A fresh record high could be reached as soon as this month.
ASX and NZX announcements/news:
- No major announcement (continue to update).
- New Zealand Q1 employment change.
- Australian retail sales for March.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.