What you need to know…

The S&P 500 Index ($SPX) (SPY) Wednesday closed down -0.38%, the Dow Jones Industrials Index ($DOWI) (DIA) closed down -0.68%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.64%.

Stock indexes Wednesday settled mixed, with the S&P 500 and Dow Jones Industrials falling to 3-1/2 week lows.  U.S. banking woes weighed on the S&P 500 and Dow Jones Industrials Wednesday after First Republic Bank sank more than -29% to a record low on a report that advisers have reportedly lined up buyers of new stock as part of a rescue plan.  Losses in First Republic Bank accelerated after Bloomberg reported that the bank faces potential curbs on borrowing from the Federal Reserve.

Wednesday's strength in Microsoft and software stocks kept the Nasdaq 100 in positive territory when Microsoft rose more than +7% after reporting better-than-expected quarterly earnings results late Tuesday.

Bloomberg reported that U.S. bank regulators are weighing the prospect of downgrading their assessments of First Republic Bank, a move that may curb the bank's access to Federal Reserve lending facilities.  The Federal Deposit Insurance Corp (FDIC) has been giving the bank time to reach a private deal to shore up its finances. But as time goes by without a transaction, the FDIC could downgrade the bank's condition, including the CAMELS rating, which would likely limit its use of the Fed's discount window and an emergency lending facility launched last month.

U.S. Mar capital goods new orders nondefense ex-aircraft and parts, a proxy for capital spending, fell -0.4% m/m, weaker than expectations of -0.1% m/m.

U.S. Mar wholesale inventories rose +0.1% m/m, right on expectations.  However, Mar retail inventories rose +0.7% m/m, above expectations of +0.2% m/m.

The markets are showing a 77% chance of a 25 bp rate hike by the Federal Reserve at the May 2-3 FOMC meeting and have fully priced in a 25 bp rate hike by the ECB at its May 4 ECB meeting.

Global bond yields are mixed.  The 10-year T-note yield rose +2.8 bp to 3.428%.  The 10-year German bund yield rose +1.3 bp to 2.397%.  The 10-year UK gilt yield rose +3.4 bp to 3.729%.

On the bearish side for stocks, First Republic Bank closed down more than -29% and posted a record low after Bloomberg reported that the bank faces potential curbs on borrowing from the Federal Reserve.

Also, Activision Blizzard closed down more than -11% after the UK’s Competition and Markets Authority blocked Microsoft’s takeover of the company.  In addition, Old Dominion Freight Line closed down more than -9% after reporting weaker-than-expected Q1 revenue.

On the bullish side, Microsoft closed up more than +7% after reporting better-than-expected Q3 revenue.  Also, Chipotle Mexican Grill closed up more than +12% after reporting Q1 comparable sales above consensus.  Allegion Plc closed up more than +5% after reporting better-than-expected Q1 net revenue.

Overseas stock markets Wednesday settled lower.  The Euro Stoxx 50 closed down -0.69%. China’s Shanghai Composite closed down -0.02%, and Japan’s Nikkei Stock Index closed down -0.71%. 

Today’s stock movers…

First Republic Bank (FRC) closed down more than -29% at a record low to lead losers in the S&P 500 after CNBC reported that advisers have lined up potential buyers of new stock as part of a rescue plan for the bank.  Losses in the stock accelerated after Bloomberg reported that the bank faces potential curbs on borrowing from the Federal Reserve.

Activision Blizzard (ATVI) closed down more than -11% after the UK’s Competition and Markets Authority blocked Microsoft’s takeover of the company.

Old Dominion Freight Line (ODFL) closed down more than -9% after reporting Q1 revenue of $1.44 billion, weaker than the consensus of $1.48 billion.  JB Hunt Transport Services (JBHT) also closed down more than -4% on the news.

Tesla (TSLA) closed down more than -4% after Jeffries downgraded the stock to hold from buy, saying lower returns will drag on the stock until earnings upgrades begin to emerge. 

Illumina (ILMN) closed down more than -3% after reporting Q1 cash and cash equivalents of $1.49 billion, well below the consensus of $2.11 billion. 

Texas Instruments (TXN) closed down more than -2% after forecasting Q2 revenue of $4.17 billion-$4.54 billion, the midpoint below the consensus of $4.44 billion. 

Chipotle Mexican Grill (CMG) closed up more than +12% to lead gainers in the S&P 500 after reporting Q1 comparable sales rose +10.9%y/y, stronger than the consensus of +8.51% y/y. 

Microsoft (MSFT) closed up more than +7% to lead gainers in the Dow Jones Industrials after reporting Q3 revenue of $52.86 billion, better than expectations of $51.03 billion.  Other software stocks rose on the news, with Datadog (DDOG) closing up more than +10% to lead gainers in the Nasdaq 100.  Also, Snowflake (SNOW) closed up more than +8%, Atlassian Corp (TEAM) closed up more than +6%, and Workday (WDAY) and ServiceNow (NOW) closed up more than +2%. 

Allegion Plc (ALLE) closed up more than +5% after reporting Q1 net revenue of $923.0 million, well above the consensus of $845.6 million.

CoStar Group (CSGP) closed up more than +4% after reporting Q1 revenue of $584.4 million, above the consensus of $579.8 million, and raising the lower end of its full-year revenue forecast to $2.47 billion-$2.48 billion from $2.46 billion-$2.48 billion. 

Masco (MAS) closed up more than +1% after reporting Q1 net sales of $1.98 billion, stronger than the consensus of $1.90 billion.

Across the markets…

June 10-year T-notes (ZNM23) on Tuesday closed down -8 ticks, and the 10-year T-note yield rose by +2.8 bp to 3.428%.  June T-notes Wednesday morning fell back from a 1-1/2 week high, and the 10-year T-note yield recovered from a 1-1/2 week low of 3.373%.  T-notes gave up an early advance and posted moderate losses on supply pressures, as the Treasury auctioned $24 billion auction of 2-year floating-rate notes and $43 billion of 5-year T-notes as part of this week's $144 billion auction package of T-notes and floating-rate notes. 

T-notes Wednesday morning initially moved higher as banking turmoil boosted safe-haven demand for T-notes on U.S. banking turmoil after First Republic Bank plunged more than 29% to a new record low when Bloomberg reported that the bank faces potential curbs on borrowing from the Federal Reserve. Another supportive factor for T-notes was strong demand for the Treasury’s $43 billion 5-year T-note auction that had a bid-to-cover ratio of 2.54, above the 10-auction average of 2.42. 

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