US: Stocks down as First Republic’s plunge sparks bank fears

WALL Street stocks plummeted on Tuesday, as shares of First Republic Bank were battered after an earnings report that showed it lost a large amount of deposits – reviving worries over the financial sector.

Investors have been eyeing the performance of regional lenders since the dramatic failures of Silicon Valley Bank and Signature Bank last month, which sparked fears of contagion.

On Monday, First Republic said it lost more than 40 per cent of its deposits in the first quarter this year, and its shares sank nearly 50 per cent as of end-Tuesday.

The Dow Jones Industrial Average slumped 1.0 per cent to 33,530.83, while the broad-based S&P 500 fell 1.6 per cent to 4,071.63.

The tech-heavy Nasdaq Composite Index plunged 2.0 per cent to 11,799.16.

The gloomy showing came after First Republic reported a drop of nearly US$72 billion in deposits over the first quarter.

Excluding a US$30 billion injection from a consortium of 11 US banks, the figure would have topped US$100 billion.

Besides First Republic, Western Alliance Bancorporation dropped 5.6 per cent while PacWest Bancorp slid 8.9 per cent.

“The financial sector is having a bad day,” said Steve Sosnick, chief strategist at Interactive Brokers.

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He added that other contributing factors include the disappointing earnings report of logistics giant UPS. UPS shares fell around 10 per cent.

“UPS is essential to the US economy... If their volumes are disappointing that doesn’t bold well,” Sosnick said.

Meanwhile, traders are set to digest the corporate results of tech firms Microsoft and Google parent Alphabet, who reported after the bell. AFP