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Wall Street Plummets Amid Fears of Economic Slowdown and Weak Earnings

U.S. stocks hit on Tuesday as a disappointing UPS forecast fueled investor concerns over a slowing U.S. economy. The weak outlook from UPS, combined with a significant drop in First Republic Bank's deposits, also raised concerns about the banking sector's health.

Wall Street sign
Wall Street sign

Courier Company's Lowered Outlook Impacts Market

United Parcel Service Inc (NYSE: UPS) shares experienced a 9.8% drop, marking the largest one-day decline over eight years. This came after the courier company predicted full-year revenue at the lower end of its previous expectations due to a weakening economy. This negative forecast impacted the Dow Jones Transport Average index, which fell 3.6%, and FedEx Corp (NYSE: FDX), which lost 3%.

Falling Consumer Confidence and Tech Earnings Awaited

Investors anxiously await quarterly results from major technology companies, including Microsoft Corp (NASDAQ: MSFT). Additionally, concerns rise as U.S. consumer confidence data reveals a nine-month low in April. Carol Schleif, CIO for BMO Family Office, commented on the investor's struggle to maintain stability during a week of substantial earnings, economic data, and the upcoming Federal Reserve announcement.

Banking Sector Suffers as First Republic Shares Plummet

The KBW Regional Banking index dropped 3.4%, and the broader S&P 500 bank index fell 2.4% as First Republic Bank shares tanked 41%, hitting a record low. The bank reported over $100 billion in deposits during Q1, following the most significant banking crisis since 2008. Schleif emphasized the importance of regional banks' health for mid-size businesses in the U.S.

Major Indices Fall Amid Sector Weakness

The Dow Jones Industrial Average dropped 320.58 points (0.95%) to 33,554.82, the S&P 500 lost 57.86 points (1.40%) to 4,079.18, and the Nasdaq Composite decreased by 203.41 points (1.69%) to 11,833.80. Materials, consumer discretionary, and industrials sectors experienced the most significant losses.

Mixed Results from General Motors and PepsiCo

General Motors Co (NYSE: GM) saw a 3.8% drop after initially experiencing gains, as the automaker warned that price gains throughout 2022 would not last. On the other hand, PepsiCo (NASDAQ: PEP) Inc shares rose by 2% after increasing their annual revenue and profit forecasts, causing consumer staples stocks to outperform.

Major Companies' Earnings Reports Awaited

First-quarter S&P 500 earnings estimates have narrowed to a 3.9% decline from an initial 5.1% decline, according to Refinitiv data. However, some of the largest companies, such as Alphabet (NASDAQ: GOOGL) Inc and Microsoft, have yet to report their results.