A pedestrian walks by a First Republic bank on April 26, 2023 in San Francisco, California.
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Big Tech continues its winning streak, but it wasn't enough to ignite a broader rally in markets because of fears reignited by First Republic.
What you need to know today
- First Republic Bank has a plan to save itself, CNBC learned from sources. Advisors to First Republic are persuading big U.S. banks to buy bonds from First Republic at above-market prices. Though those big banks will lose money on the purchase, their losses would be much lower than the Federal Deposit Insurance Corp. fees banks would have to pay if First Republic fails.
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- Meanwhile, First Republic's stock continued its freefall. It plummeted 29.75% Wednesday to hit an all-time low of $5.69, giving the bank a market value below $1 billion.
- Still, the global banking sector looks mostly solid, at least for big banks. Deutsche Bank reported a net profit attributable to shareholders of 1.158 billion euros, which was a 9.2% increase from a year earlier. That's the 11th straight quarter of profit for the German bank — though it's joining other companies in laying off workers because of falling revenue.
- Meta's first-quarter revenue rose 3% to $28.65 billion from a year earlier, mostly because of Chinese retailers spending more on Facebook ads. Adding to the good vibes, the company projected that revenue in the second quarter will come in higher than Wall Street's expectations. The company's stock jumped 11.63% in extended trading.
- Samsung's first-quarter operating profit plunged 95% year on year, from 14.12 trillion Korean won to 640 billion won (roughly $478.55 million), amid a steep decline in PC shipments this year. The bad times could be here to stay: Samsung expects demand for memory chips to remain weak this year.
- U.S. stocks ended Wednesday mixed as First Republic's troubles overshadowed excitement about Big Tech earnings. Asia-Pacific markets traded higher Thursday. Singapore's Straits Times Index lost 0.39%, weighed down by real estate stocks, as the country increased stamp duties on property purchases.
- PRO First-quarter economic growth in the U.S. is likely to hit at least 2% year on year, according to analysts' projections. Despite that solid number, there are signals that a recession is still coming.
The bottom line
Money Report
Big Tech continues its winning streak, but it wasn't enough to ignite a broader rally in markets.
On Wednesday, Microsoft rallied 7.24% on the back of a strong earnings report that was boosted by a jump in revenue from its Intelligent Cloud business segment. The tech company's stock hit a 52-week high, putting it within a hair's breadth of $300 per share. Amazon climbed 2.35% as investors hoped the e-commerce giant, which is the market leader in cloud services, would post strong numbers Thursday too.
Still, the tech-heavy Nasdaq Composite finished the day only 0.47% higher. (Meta, which also had an excellent first quarter, posted earnings after markets closed.)
Why didn't the Nasdaq rise more from Big Tech's better-than-expected first-quarter results? Probably because tech stocks were already doing so well.
"There was such a rally into their earnings season that I think you needed earnings to really clear a high bar to actually catalyze another leg higher," said Ross Mayfield, investment strategy analyst at Baird. "That just hasn't been the case, especially when you have other headwinds pressing down on the market."
Indeed, fears around First Republic induced losses in other major indexes. The Dow Jones Industrial Average lost 0.68% and the S&P slipped 0.38%.
Banks might not be as exciting as technology companies. But banks are so fundamental to the health of the economy that any sign of weakness in one is enough to send waves of fear throughout investors and make them forget, if only temporarily, the promises of Big Tech. What use is there, after all, in building a skyscraper if the foundation is shaky?
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