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Wall Street to Open Lower Amid Mixed Earnings and Banking Concerns

Wall Street was poised for a lower opening on Tuesday due to mixed earnings reports and concerns surrounding the banking sector. The plunge in deposits at First Republic Bank (NYSE: FRC) particularly raised eyebrows.

Wall Street sign
Wall Street sign

First Republic Bank Shares Drop 22.8% After Deposit Flight

First Republic shares plummeted 22.8% in premarket trading after the bank reported a loss of over $100 billion in deposits during Q1, following the largest banking crisis since 2008. Regional banks PacWest Bancorp and Western Alliance (NYSE: WAL) Bancorp also experienced 2.5% and 4% declines, respectively.

Banking Indexes Suffer Following Lender Collapse

So far this year, the KBW Regional Banking index and the S&P 500 bank index have lost 22% and 9%. The collapse of two mid-sized lenders last month has significantly impacted the banking sector.

Rising Interest Rates Put Pressure on Small and Mid-Sized Banks

Stuart Cole, a head macroeconomist at Equity Capital, explained that rising interest rates have depositors worried about the challenges small and mid-sized lenders face. The cost of emergency funding for these banks could become too expensive, rendering them unprofitable.

Investors Monitor Inflation and Interest Rate Hikes Impact

Investors are concerned about the effects of high inflation and the Federal Reserve's aggressive interest rate hikes on companies' margins. PepsiCo (NASDAQ: PEP), McDonald's Corp (NYSE: MCD), General Electric (NYSE: GE), and General Motors Co (NYSE: GM) all reported positive financial updates.

UPS Shares Slide Amid Weakening Economy and Lower Revenue Forecast

United Parcel Service Inc (NYSE: UPS) shares fell 5.0% as the company anticipated full-year revenue to be at the lower end of their earlier estimate due to a weakening economy. FedEx Corp (NYSE: FDX) also saw a 1.7% loss.

Busy Week for Earnings as S&P 500 Companies Report Results

This week, 178 S&P 500 companies are expected to report their Q1 results. Analysts predict a near-5% drop in Q1 profits for these companies, according to Refinitiv data. Alphabet (NASDAQ: GOOGL) and Microsoft Corp (NASDAQ: MSFT) are set to announce earnings after the market closes on Tuesday.

Jerome Powell
Jerome Powell

Investors Await Fed's Monetary Policy Decision in May

Investors are looking forward to the Federal Reserve's monetary policy decision in May for signals on the path of interest rates. Traders anticipate a 25 basis point rate hike next week, followed by a steady period and rate cuts later this year.

April Consumer Confidence Data and March New Home Sales Data Expected

Upcoming data releases include April consumer confidence data and March new home sales unit data, which will be available after the opening bell. Additionally, Spotify Technology SA (NYSE: SPOT) saw a 6.1% increase after reaching 500 million monthly active users, while 3M Co gained 1.4% due to plans for cutting about 6,000 positions globally.