Making sense of the markets this week: April 30, 2023 – MoneySense

Tech is in the driver’s seat, again 

This is the week that delivered the greatest earnings breadth in terms of the numbers of stocks and earnings dollar value. It’s what’s called an earnings bonanza! Just a handful of large-cap tech stocks powered the S&P 500’s gains during the first quarter of 2023, despite regional banking turmoil and recession fears. As I wrote in the below tweet, that’s nothing new for the U.S. stock market, and we’re seeing a repeat. In this tweet you’ll see how the individual tech giants contributed to the market returns:

Nothing new. The returns for the S&P 500 driven by a handful of stocks. More than 5% of the S&P 500’s year-to-date gain of 6.6% gain is down to just seven tech titans; S&P 500 futures are currently indicating a positive start to the day. via @SPGlobal pic.twitter.com/Oj42XhKDye

— CutTheCrapInvesting (@67Dodge) April 26, 2023

U.S. stocks were higher last Wednesday, as a surge in shares of Microsoft (MSFT/Nasdaq) buoyed other big technology names. On Wednesday, nine of the 11 S&P sectors were trading in the red. The tech sector rose more than 2% and tacked on another 2% on Thursday. However, futures were down Friday morning after Amazon (AMZN/Nasdaq) shares popped Thursday only to give it all back and then some just before we went to press. 

In last week’s column, I suggested that the regional bank crisis could be far from over. And, right on cue, First Republic Bank (FRC/NYSE) stepped up to the guillotine. 

The lender’s stock shed nearly 50% last Tuesday after it disclosed more than  USD$70B of deposit outflows in its first quarter; the stock extended its fall last Wednesday. 

On Monday, Bob Elliott, former Senior Investment Executive at Bridgewater Associates, suggested that First Republic was a zombie bank. 

Stopped by @CNBCOvertime to talk $FRC release.

FRC is a zombie bank, and if anything report was worse than expected.

Good macro news is that FRC pain implies less borrowing from the Fed from other banks. Suggests a more contained ‘crisis’ than previously known. https://t.co/dAUM2HjhIF

— Bob Elliott (@BobEUnlimited) April 24, 2023

This quote from Seeking Alpha frames the week:  

“There’s been a bit of a tug-of-war in markets over the last 36 hours between the dominance of U.S. tech pulling aggressively on one side against the still shaky foundations of U.S. regional banks on the other. … Meta’s positives after-the-bell earnings have helped again overnight but the battle is set to continue.”

—Jim Reid, Deutsche Bank

Google and Microsoft were two of the tech stars in the headlines. The market has certainly attached a premium to how many times management mentions the letters AI, for artificial intelligence. The potential of AI is driving the enthusiasm. 

Microsoft stock soared after its earnings release, while Google declined.