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Fundamental Analysis

Equities Plunge Amid Recession Worries Fueled by Poor Data, Earnings

  • Investors fled for safe havens due to weak economic data and disappointing earnings.
  • Consumer confidence in the United States hit a nine-month low in April. 
  • ECB’s Lane said that rates need to be increased again next week.

On Tuesday, US equities plunged, ending the day in the red, while Treasury yields fell. Investors fled for safe havens due to weak economic data and disappointing earnings.

The session concluded with all three major indices down by 1% or more. The tech-heavy Nasdaq fell 2%, marking its largest one-day decline since March 9.

Those losses increased as a study revealed a greater decline in US consumer confidence than anticipated.

US consumer confidence (Source: The Conference Board)
US consumer confidence (Source: The Conference Board)

According to a survey released on Tuesday, consumer confidence in the United States plunged to a nine-month low in April. This drop was due to a deteriorating outlook that suggests a looming recession.

The Conference Board revealed that its consumer confidence index plummeted from 104.0 in March to 101.3. It was the lowest recorded reading since July 2022. Economists had expected the value to hold at 104.0, the same as in March.

Consumer expectations decreased and stayed below the mark, frequently foreshadowing a short-term recession.

First Republic Bank reported a deposit drop that pushed its shares and the larger KBW regional banking index substantially lower. The bank was under pressure due to worries about regional bank liquidity.

Benchmark Treasury yields experienced their biggest decline since March. Market players were anxious about the approaching debt ceiling deadline. There were also concerns about a liquidity crisis in the local banking industry, which were made worse by First Republic data.

European equities fell due to statements made by policymakers at the European Central Bank on the direction interest rates might take. The hawkish remarks overshadowed the largely positive earnings.

Spanish stocks saw their worst day in a month as heavyweight Santander led a decline in the banking sector following a dismal batch of earnings.

Refinitiv data predicts a 2.6% decline in first-quarter earnings for STOXX 600 companies, compared to a 2.5% drop from a week earlier.

According to reports, Philip Lane, the chief economist at the European Central Bank, said that interest rates need to be increased again at the central bank’s policy meeting next week. He joins a chorus of other decision-makers who have recently sounded hawkish. The ECB is expected to raise rates by 25 basis points on May 4.