Stock market today: Stocks tumble on profit, economy worries

The S&P 500 fell 1.6% to snap out of a one-week pause. The Dow Jones Industrial Average fell nearly 345 points, or 1%, while the Nasdaq composite sank 2%.

Bank of the First Republic it had the biggest loss in the S&P 500 by far, with its shares nearly halved after it said customers withdrew more than $100 billion during the first three months of the year. That doesn't include $30 billion in deposits big banks put up to build confidence in their rival after the second and third-biggest US bank failures in history shook confidence.

The size of the drop in deposits renewed concerns about the US banking system and the risk of a lending pullback that would undermine the economy. That dwarfed First Republic analysts' earnings expectations, and its shares fell 49.4%.

So far this reporting season, most companies have exceeded expectations, but the bar was considerably low. Analysts are forecasting the worst drop in S&P 500 earnings since the spring of 2020, when the pandemic froze the global economy. That's why Wall Street focuses as much, if not more, on what companies say about their future prospects as they do on their last three months.

UPS fell 10% after meeting earnings forecasts but said it made less revenue than expected. It also said its full-year revenue will likely hit the lower end of its earlier forecast, citing a challenging economy and other factors.

Danaher was another heavyweight in the market, falling 8.8% despite reporting better-than-expected earnings and revenue. Analysts noted that it cut its forecast for a key measure of revenue over the course of the year.

On the winning side, PepsiCo rose 2.3% after beating profit expectations. Homebuilder PulteGroup rose 1.7% after also beating forecasts.

The heart of earnings reporting season is approaching, and more heavy hitters arrived after the close of business for the day.

Microsoft and Google parent Alphabet rose in after-hours trading after reporting above-expected earnings. Because they are two of the largest companies on Wall Street by market value, their stock movements carry additional weight in the S&P 500 and other market indices.

The broad stock indices have been making only modest moves so far this earnings season. The S&P 500 barely moved last week, only up 0.1% on Monday. But Barclays' volatility strategists said the calm was unlikely to last long-term.

The economy is under pressure due to high interest rates aimed at controlling inflation. High rates can stifle inflation, but only by slowing down the entire economy and hurting investment prices. Large portions of the economy outside of the labor market have already begun to slow or contract.

With so much uncertainty about whether inflation can return to the Federal Reserve's target without causing a recession, "we remain skeptical that markets are out of the woods," Barclays strategists led by Stefano Pascale said in a report. They also pointed out "the risk of something breaking" in the financial system due to high rates.

A report on Tuesday showed that Consumer confidence fell sharper in April than expected, to its lowest level since July. That's a grim sign when consumer spending makes up the bulk of the American economy.

A separate report was more encouraging, saying new home sales rose more than expected. The housing industry has been under pressure as higher mortgage rates are putting pressure on buyers.

On Thursday, the US will give its first estimate of how much the economy grew during the first three months of the year. Economists expect growth to cool to an annual rate of 1.9%, down from 2.6% at the end of 2022.

Much of the slowdown is due to the barrage of interest rate hikes by the Fed over the past year. The Federal Reserve meets next week and much of Wall Street expects it to raise interest rates at least one more time before pausing.

Beyond higher interest rates, Wall Street is also concerned that difficulties in the US banking industry could further slow the economy. First Republic said its deposits have stabilized since the end of March, but it is still working to reduce spending. If he and other banks pull back on loans, it could lead to slower growth across the economy.

In total, the S&P 500 fell 65.41 points to 4,071.63. The Dow fell 344.57 to 33,530.83 and the Nasdaq fell 238.05 to 11,799.16.

In the bond market, the 10-year Treasury yield fell to 3.39% from 3.50% late Monday. Helps set rates for mortgages and other major loans.

The two-year yield, which is driven more by expectations for Fed action, fell to 3.95% from 4.11%.

In overseas markets, stock indices closed mostly lower in Europe and mixed in Asia overnight.

AP business writers Joe McDonald and Matt Ott contributed.