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U.S. stock indexes close down: Nasdaq 0.8%, S&P 0.6%, Dow
0.3%
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Cons. disc. is weakest S&P sector, cons. staples is only
gainer
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Gold rises; dollar, crude, bitcoin down
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U.S. 10-year Treasury yield dips to ~3.53%
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WALL ST FALLS WITH TESLA, BANKS, ENERGY UNDER PRESSURE (1609 EST/2009 GMT)
Wall Street's major indexes closed lower on Thursday with Nasdaq leading losses, down 0.8%, and the biggest drag coming from Tesla , whose quarterly report and professed favor of sales growth over profit sent investors to the exits.
The electric car maker's 9.7% decline was the biggest in the S&P's consumer discretionary sector , which itself was the weakest of the benchmark index's 11 major industry sectors.
Banks underperformed the broader market falling 1.2% with the biggest losses in regionals such as Zions Bancorp , down 4.9% and Citizens Financial , down 4.7% as investors kept a watchful eye on quarterly reports.
Banks have been setting aside higher reserves to cover potential loan losses. Investors have also been concerned about regional bank customers switching deposits to bigger firms and money market funds.
The top performing S&P sector was consumer staples , which ended up 0.06%.
One of the weakest sectors was energy , which finished off 0.9% as oil prices slid by about $2 a barrel to their lowest level since late March, dragged lower by fears a possible recession could dent fuel demand and after a rise in U.S. gasoline inventories. Here is your closing snapshot:
(Sinéad Carew, Stephen Culp)
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HOME IS WHERE THE REAL ESTATE OPPORTUNITIES ARE (1350 EST/1750 GMT)
The U.S. real estate market has struggled this year, especially after banking sector woes raised concerns about lending to the sector.
Given these issues at least one investor is eyeing residential real estate as the best place to weather coming storms since everyone needs a home.
"The residential side is the one with the most attractiveness since it is a primary need," said Carlos Vaz, CEO of real estate investment firm CONTI Capital. "Office (real estate) will be in an extreme struggle both for equity and debt. Hotels are better but not much. Retail is still a struggle," Vaz told the Reuters Global Markets Forum.
The Residential REIT Income ETF , which only includes residential real estate investment trusts, has risen about 4% so far this year, outperforming the iShares US Real Estate ETF , which has hardly gained 0.4%, and the overall S&P 500 real estate sector which is up about 1.4% this year.
Still, all these funds are lagging the S&P 500's 8% rise.
Within residential real estate, Vaz points to multi-family buildings as offering the best opportunities.
"Fannie Mae and Freddie Mac are still lending for great opportunities, there is an economy of scale that is always favorable," Vaz said.
He sees multifamily capitalization rates potentially rising to 5.5% range for some time, offering some upside given that even safe-haven U.S. two-year Treasuries are offering yields above 4%.
However, he noted that the real estate sector faces ongoing challenges across the board, including rising construction costs, less spending and investment and more stringent lending from banks.
(Lisa Mattackal)
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TESLA PRICE WAR FEARS REVERBERATE ACROSS WALL ST (1305 EST/1705 GMT)
Tesla's disappointing quarterly report is having a big effect on Thursday's U.S. stock market. Chief Executive Elon Musk's promise to prioritize sales growth ahead of profit in a weak economy has the electric-vehicle maker's stock
tumbling more than 9%, on track for its deepest one-day slump since early January.
That drop has cut Tesla's market capitalization by about $50 billion. If Tesla ends Thursday's session at its current valuation of $517 billion, it will have fallen below the stock market value of Meta Platforms for the first time since late 2021. Meta's market capitalization stood at $554 billion Thursday with its stock up 0.2%.
Late on Wednesday, Tesla
posted
its lowest quarterly gross margin in two years, missing
market estimates, as it slashed prices aggressively in markets
including the United States and China to spur demand and fend
off rising competition.
Musk said he was willing to sacrifice short-term profit margins for long-term growth. Fear that Musk is launching a price war hit the shares of rival automakers, with Ford Motor and General Motors losing more than 3%.
EV makers Stellantis , Li Auto , Nio , Lucid Group and Rivian all fell more than 4% on Wall Street.
"Tesla’s strategy is considerably worse news for other automakers worldwide. While Elon Musk has recently argued Tesla is not waging a price war, his own characterization of Tesla’s pricing strategy as leveraging its cost leadership to grab share away from carmakers with less favorable unit economics sounds precisely like one," Deutsche analyst Emmanuel Rosner wrote in a client note.
Tesla's share slump was by far the largest contributor
to the S&P 500's 0.4% drop.
More than $23 billion worth of Tesla shares had been
exchanged shortly after mid day. This accounted for about 21% of
trading turnover in S&P 500 companies, according to Refinitiv
data.
(Noel Randewich)
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FLAGGING TAX RECEIPTS KNOCK ON DEBT LIMIT DOOR (1216 EST/1616 GMT)
With Tuesday's U.S. tax deadline in the rearview mirror, Goldman Sachs says this year's receipts are running far below last year's levels and it weighed the possibility for an earlier-than-expected United States debt ceiling deadline.
So far Goldman notes, in research released late on Wednesday and led by Jan Hatzius, non-withheld receipts month-to-date (MTD) were down 29% vs GS' previous expectation for a 28% decline. Its previous expectation had the U.S. debt limit deadline hitting in late July, recently moved from August.
But assuming a greater number of tax payers file electronically this year, and adjusting for calendar issues, it says MTD receipts are down 31% from last year. When the month shakes out, Goldman estimates that if April receipts are down by 35% or more, it sees the U.S. Treasury announcing a early June debt limit deadline. But if receipts finish down by less than 30%, a late July deadline is more likely, it said.
The U.S. Treasury brought in $129.82 billion in total tax receipts on Tuesday, the annual tax filing deadline, compared with $75.53 billion a day earlier, the department's daily financial statement showed on Wednesday.
But GS points out that tax collections the day after tax day
- April 18 this year - are usually as big as the deadline day
and it suggests that the U.S. Treasury won't have collected at
75% of its April and May payments until April 25.
But meanwhile the showdown over U.S. government efforts to
raise the $31.4 trillion debt ceiling for the world's largest
economy was already sending jitters through global markets,
lifting the cost of insuring exposure to its debt to the highest
level in over a decade on Thursday. And JPMorgan warned of a
"non-trivial risk" of a technical default on U.S. Treasuries.
(Sinéad Carew, Davide Barbuscia)
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DAMP DATA DUMP: JOBLESS CLAIMS, HOME SALES, PHILLY FED, LEADING INDEX (1132 EST/1532 GMT) A quartet of mostly dismal data greeted investors on Thursday morning, all of which seem to be marching in the same direction: towards the land of economic downturn.
The number of U.S. workers filing first-time applications for unemployment insurance unexpectedly ticked higher last week, rising 5,000 to 245,000 according to the Labor Department. This marks the 11th straight week of initial claims above the 200,000 mark, which is the lower end of a range associated with healthy labor market churn. It's also the latest piece of evidence that the labor market is beginning to ease, as wage growth cools, job openings continue to retreat from record highs, and layoffs continue to mount.
"Claims have steadily inched upwards since Q4 2022, adding to other employment data that show peak tightness in the labor market is in the rear-view and the Fed's aggressive monetary policy is starting to take effect," writes Matthew Martin, U.S. economist at Oxford Economics. That notion is supported by ongoing claims - reported on a one-week lag - which jumped 3.4% last month to 1.865 million. That's above the 1.7 million pre-pandemic level and might suggest that it's taking longer for fired workers to land new gigs. Pivoting from labor to housing, the sales of pre-owned homes fell by 2.4% in March to 4.44 million units at a seasonally adjusted annualized rate (SAAR), landing 60,000 to the south of consensus. While rising mortgage rates likely convinced would-be buyers to stand on the sidelines for now, it's of a piece with other recent indicators that suggest the housing market has found its basement and will soon make its way back to a level grade.
"Home sales are trying to recover and are highly sensitive to changes in mortgage rates," says Lawrence Yun, chief economist at the National Association of Realtors, which issued the report.
Yun adds that "home sales will steadily rebound despite several months of fluctuations," once the Fed presses the rate hike 'pause' button. Turning to manufacturing, mid-Atlantic factory activity sharply contracted this month. The Philadelphia Fed Business index, alias Philly Fed, plunged 8.1 points to a dire reading of -31.3, its lowest reading since May 2020, when the economy was reeling from the shock of the sharpest economic downturn on record. It also stands in sharp contrast to Monday's Empire State report, which showed manufacturing in New York State bouncing back into expansion. A Philly Fed/Empire State print below zero signifies monthly contraction. But beneath the top line, stand-alone number, things don't look quite as dismal. Prices paid - an inflation indicator - dropped back to earth and the employment picture improved while the six-month outlook was less cloudy.
While "details of the report were stronger" than the headline number would suggest, "manufacturing continues to face hurdles from softer demand for goods and higher borrowing costs," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics. Here's a look at the Philly Fed vs. Empire State: And finally, the Conference Board released the March print of its Leading Economic Index (LEI) , which decreased by 1.2% to its lowest level in 28 months at double the 0.6% decline analysts had expected. The index aggregates ten forward-looking data sets, including jobless claims, ISM new orders, building permits, the S&P 500, and others. "The U.S. LEI fell to its lowest level since November of 2020, consistent with worsening economic conditions ahead," says Justyna Zabinska-La Monica, senior manager of Business Cycle Indicators at The Conference Board. Zabinska-La Monica pointed to this as a sign that "economic weakness will intensify and spread more widely throughout the US economy over the coming months, leading to a recession starting in mid-2023." The major U.S. stock indexes were red, but off earlier lows by late morning. Tesla was the heaviest drag on the S&P 500, while transports were offering a rare glimpse of green.
(Stephen Culp)
*****
WALL ST OPENS RED AGAINST A MIXED EARNINGS BACKDROP (1000 EST/1400 GMT)
Wall Street's major indexes opened lower on Thursday as investors digested the latest round of first-quarter financial reports with IBM Corp beating profit estimates in a positive sign for IT services demand and Tesla Inc missing first-quarter gross margin expectations. IBM shares were flat, while Tesla shares were slammed 7.6% as its profits were hurt by aggressive price cuts and CEO Elon Musk's remarks that the electric car company would put sales growth ahead of profit.
Meanwhile, in travel and leisure, Las Vegas Sands Corp shares were gaining 5.3% after its quarterly revenue
beat the Street and also helped put a shine on shares of Wynn and MGM Resorts . Alaska Air reported a
wider than expected loss and was off 0.9%.
As bank earnings continued, some regional bank shares were
under pressure as their deposits dropped in the first-quarter,
fallout from the recent crisis in confidence in the banking
sector as depositors moved their cash to bigger firms or money
market funds.
Shares in American Express Co were off 4.2% after profits missed estimates as the credit card giant set aside reserves to cover potential losses stemming from cardholders falling behind on debt repayments. The S&P 500 11 industry sectors were a sea of red with energy leading losses as oil prices fell. Here is your opening snapshot from 0956 EDT:
(Sinéad Carew)
*****
FOR THURSDAY'S LIVE MARKETS POSTS PRIOR TO 0930 EDT/1330 GMT - CLICK HERE <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Tesla Earnings image Rates and inflation Rates and inflation Wall Street falls on earnings weakness Jobless claims Existing home sales Philly Fed Leading economic index Wall Street closes lower with Tesla, banks stocks under pressure ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting By Sinéad Carew)
