Stocks slipped Tuesday after First Republic Bank‘s earnings report reignited concerns about the broader sector.
The Dow Jones Industrial Average fell 318 points, or 0.9%. The S&P 500 lost 1.4%, while the Nasdaq Composite slid 1.7%.
Shares of First Republic Bank tumbled more than 40% after the regional bank posted its latest quarterly results, saying late Monday that deposits dropped 40% to $104.5 billion in the first quarter but have since stabilized. First Republic will also be trimming expenses, including slashing headcount by 20% to 25% in the second quarter. Bloomberg News reported Tuesday that the bank was trying to sell as much as $100 billion of loans and securities to restructure its balance sheet.
The regional bank has been closely followed after investors grew concerned it could face the same fate as Silicon Valley Bank and Signature Bank, whose closures set off an industry crisis last month. First Republic shares have fallen more than 90% so far this year.
Both the SPDR S&P Regional Banking ETF (KRE) and SPDR S&P Bank ETF (KBE) lost more than 3% as financials weighed on the market. Western Alliance Bancorp and PacWest slid 7% and 8%, respectively, while Charles Schwab shed almost 4%. The market fell in symphony as First Republic shares notched new lows in afternoon trading.
“For the first time since this earnings season has started, we’ve actually seen the market react,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “There’s been a built up, or pent up, selling reaction to earnings that are just OK, but not great. And today the floodgates seemed to have opened — and once that started, nobody seems to want to get in the way.”
Traders also fretted over a disappointing earnings report from UPS, which was down 9% after the company missed expectations and management said sales volumes were — and should continue to be — under pressure. PepsiCo, on the other hand, rose more than 2% on better-than-expected numbers.
Microsoft and Alphabet are slated to report Tuesday after the bell, the first of multiple Big Tech names on the earnings schedule this week. But those stocks could struggle, according to Jay Hatfield, chief investment officer at Infrastructure Capital Management, after rallying earlier this year
Alphabet shares fell 1% ahead of the Google-parent’s earnings after the market closes. The company has been on an earnings cold streak, missing Wall Street estimates the last four quarters, according to Bespoke Investment Group.
“Tech isn’t working as a ballast because it ran up so much and because we’re getting close to earnings,” Hatfield said. “The rubber is hitting the road, so those companies have to do quite well to justify it.”
— CNBC’s Jesse Pound contributed reporting
Correction: A previous version misstated when Amazon reports earnings.