First Republic, Fed meeting, Apple earnings - what's moving markets

May 1, 2023 7:16 AM EDT -- First Republic Bank has been taken over by Californian authorities with JPMorgan Chase assuming its deposits, at the start of a week that includes a Federal Reserve meeting, Apple earnings, and the monthly U.S. jobs report.

1. First Republic Bank falls

First Republic Bank’s (NYSE: FRC) days as a stand-alone entity are over, after California's financial regulator announced on Monday that it has taken possession of the San Francisco-based lender, while JPMorgan Chase (NYSE: JPM) will assume all of its deposits.

U.S. regulators had called on Sunday for banks to submit final bids for the troubled lender in an auction, with Reuters reporting that PNC Financial Services Group (NYSE: PNC), JPMorgan Chase, and Citizens Financial (NYSE: CFG) were among banks that got involved, while Bank of America (NYSE: BAC) and US Bancorp (NYSE: USB) decided against bidding.

Authorities have stepped in after the regional lender’s stock slumped over the past week, following the revelation that more than $100 billion in deposits departed in the first quarter in the wake of the failures of Silicon Valley Bank and Signature Bank.

2. All eyes on the Fed

The week’s highlight for investors will be the Federal Reserve’s policy-setting meeting, which could mark the last increase of the U.S. central bank’s aggressive year-long tightening cycle.

The Fed is widely expected to increase interest rates by another quarter percentage point on Wednesday, marking the 10th consecutive increase going back to March of last year, as inflation remains stubbornly high.

But expectations are growing high that slowing economic growth and concerns about the banking sector will persuade officials to then hold policy before turning toward lowering rates by year’s end.

Last week’s first-quarter gross domestic product figures pointed to an economy that’s struggling, putting the economic data focus next on Friday’s jobs report. The forecast 182,000 increase in April payrolls would mark the third straight month of decelerating employment growth.

3. Futures subdued; ISM manufacturing data due

U.S. futures traded in a subdued fashion Monday, with investors cautious at the start of a week that includes a crucial Fed meeting, the widely-watched monthly jobs report, and corporate results from a number of important companies.

At 05:00 ET (09:00 GMT), the Dow futures contract traded largely flat, S&P 500 futures inched down 2 points or 0.1%, and Nasdaq 100 futures dropped 10 points or 0.1%.

The main indices are coming off a positive month, with the blue-chip Dow Jones Industrial Average gaining 2.5%, its best month since January, the broad-based S&P 500 up 1.5%, while the tech-heavy Nasdaq Composite just edged higher.

Away from a deluge of quarterly corporate earnings, Monday also sees the release of ISM manufacturing data and construction spending, with investors looking for clues on the strength of the economy ahead of Wednesday’s Fed meeting.

4. Apple leads earnings charge

The quarterly corporate earnings season continues this week, with Apple (NASDAQ: AAPL), the largest U.S. company by market value, set to report earnings on Thursday.

The report from the iPhone maker is a bellwether for global consumer demand and its results stand to ripple through markets.

A little over half of S&P 500 companies have reported so far, and first-quarter earnings are on track to fall 3.7% for the period, a smaller drop than the 6.7% decline projected at the end of March, according to FactSet.

Monday sees the results from Norwegian Cruise Line (NYSE: NCLH) and MGM Resorts (NYSE: MGM), and some other big-name companies set to report in the coming week include Ford (NYSE: F), Starbucks (NASDAQ: SBUX), Advanced Micro Devices (NASDAQ: AMD), Kraft Heinz (NASDAQ: KHC), Marriott International (NASDAQ: MAR), Moderna (NASDAQ: MRNA), Pfizer (NYSE: PFE), and Uber Technologies (NYSE: UBER).

5. Oil prices slip on Fed hike, Chinese PMI concerns

Crude prices fell Monday, weighed by weak Chinese manufacturing data as well as concerns another interest rate hike by the Federal Reserve will limit activity in the world’s largest economy.

By 05:00 ET, U.S. crude futures were 2.2% lower $75.10 a barrel, while the Brent contract dropped 2.1% to $78.65 per barrel.

Data released Sunday showed that China's official manufacturing purchasing managers' index slipped into contraction territory, falling to 49.2 from 51.9 in March, dashing hopes for a prompt and sustained recovery in activity after the lifting of severe COVID restrictions by the largest importer of crude in the world.

On the supply side, oil output cuts of just over 1 million barrels per day, announced last month by the Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, have taken effect.

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