Economic news dominated financial news in March, sending some of the most valuable companies higher and lower. The stock market's biggest movers created and wiped out tens of billions in shareholder value on their own. These four stocks represented some of the most important trends in the stock market last month.
1. Wells Fargo
Shares of Wells Fargo (WFC 2.73%) dropped 20% in March. The giant financial institution was one of the biggest casualties of the banking crisis that rippled through the sector last month. The failures of Silicon Valley Bank and a few other regional banks fueled fears about the stability of financial institutions in the U.S. and abroad. This crushed stocks across the industry, and the list of March's worst-performing stocks was littered with names from the financial sector.
The SPDR S&P Bank ETF tumbled 23% in March, and the SPDR S&P Regional Banking ETF dropped 29%. Smaller, regional banks were especially hard-hit due to heavier customer concentration and a lower likelihood of regulator support in the event of failure.
WFC Total Return Level data by YCharts
Wells Fargo may not have been the worst-performing bank last month, but its enormous scale translated to a massive loss of equity value. It shed nearly $30 billion in market capitalization in March. We may have avoided a full-blown banking crisis, but the Fed's rapid interest rate hikes combined with a slowdown in corporate cash flow have made it a difficult environment for financial institutions.
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2. United Airlines
United Airlines (UAL 5.50%) sank 16% last month, leading a rout that was felt among all the major airline stocks. United announced that its first-quarter earnings would fall short of initial forecasts, citing higher-than-expected labor and fuel costs. This was unwelcome news, but the airline stocks were taking a beating prior to that announcement.
KBE Total Return Level data by YCharts
United operates in a highly cyclical industry, and airline stocks are especially sensitive to macroeconomic conditions. Moreover, United and its peers maintain debt-heavy capital structures. Turmoil in the banking industry is likely to result in tighter lending standards, which could translate to higher cost of capital for businesses with high financial leverage.
United and the other airlines are dealing with cost control right now, despite enjoying a fairly strong demand environment. Things could quickly deteriorate further if we enter a recession. The next few quarters might be rough for airline stocks. Results might be similar for other high-leverage, cyclical businesses.
3. Intel
Intel (INTC -1.79%) shares rose almost 30% last month, leading the charge for a rebounding semiconductor industry. Intel excited Wall Street with an investor day presentation that focused on the chipmaker's promising opportunities in the data center and artificial intelligence markets. These high-growth markets have created a lot of buzz among analysts and investors for other semiconductor stocks recently, so Intel benefited from leaning into that momentum.
Microchip sales have struggled with high inventories and weak demand from the consumer electronics market. However, Micron recently suggested that semiconductor market conditions have bottomed, and that it expects a recovery over the next few quarters. Suddenly, semiconductor stocks could be entering a cyclical growth phase combined with long-term growth catalysts form non-traditional end markets. That translated to a huge month for several semiconductor stocks, including AMD and Nvidia. While most other stocks are struggling with difficult macroeconomic conditions, semiconductors seem like a relative safe haven.
4. Meta
The Fed announced another round of rate hikes and recession fears grew in March. That doesn't sound like good news for growth, but Meta (META 1.54%) jumped 19% as large-cap tech stocks charged higher. Meta announced another huge round of layoffs in an effort to control expenses, which seems to be a weekly headline among the largest software companies. While that's an ominous signal for the economy, it's been popular with investors who welcome the refocus on efficiency as growth halts.
Evidence suggests that there has to be another catalyst behind Meta's strong month, though. Shares of Apple, Alphabet, Microsoft, Adobe, and Salesforce rose between 10% and 20% in March. That's essentially all of the biggest software stocks climbing together, while most other sectors were flat or down. It seems as if the likelihood of an economic slowdown has been fully digested and reflected in the prices of high-growth tech stocks. These businesses have all responded to the slowdown by shedding costs and reducing cash burn.
The Fed's latest announcement hinted at a potential end to rate hikes later this year, and the banking sector issues could also dampen inflation. If interest rates flatten or fall later this year, then large-cap tech stocks look like a fairly safe bet for the medium term.
