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The selloff wasn’t the obvious reaction to JPMorgan’s rescue act. It shows the big banks are, once again, willing to step in and is another example of depositors being protected.

On top of that, regional bank earnings weren’t all that bad and at one point it seemed the turmoil was in the rearview mirror.

But there are reasons to be nervous, too. Berkshire Hathaway Vice Chairman Charlie Munger issued a warning to banks about commercial property loans on Monday and tough times to come as property prices fall.

JPMorgan CEO Jamie Dimon had also declared “this part of the crisis is over,” but said “there may be another smaller one,” when referring to banks at risk. Investors seemed to focus on the latter of those quotes.

The Federal Reserve is adding to the uncertainty. The U.S. central bank could ease the pressure and lend a helping hand, if it so wished. Cutting interest rates would do just that—easing the billions of dollars in unrealized losses on bonds that have mounted on bank balance sheets as rates have climbed.

But it won’t do it, at least not yet. The Fed is preoccupied with its primary mission, tackling inflation, which remains stubbornly high.

Regional banks are collateral damage in the Fed’s battle against price hikes. The longer that fight goes on, the more damage will be done.

—Callum Keown

*** Join MarketWatch real estate reporter Aarthi Swaminathan today at noon when she talks with Brown Harris Stevens CEO Bess Freedman about what’s squeezing the housing market, and where the bright spots are as people go house hunting this spring. Economic uncertainty, fluctuating mortgage rates, and a low supply of homes on the market are frustrating buyers. Sign up here.

Try your hand at this morning’s Barron’s Daily crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week’s cover story, click here.

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Regional Bank Stocks Sink on Worries of Further Pressure

Shares of regional banks PacWest Bancorp and

Western Alliance Bancorp sank again on Tuesday as fears about the health of the banking system resurfaced ahead of the Federal Reserve’s decision on interest rates on Thursday. Rising rates since last year have pressured the balance sheets of regional lenders.

• Los Angeles-based PacWest lost 28%, while Western Alliance shares fell 11%. Both traded modestly higher in after-hours action. The SPDR S&P Regional Banking ETF fell more than 6%, with Cincinnati’s Fifth Third Bancorp down 5% and Minneapolis’ U.S. Bancorp down 7%.
• Rising rates are making certain products, such as Treasuries and money-market funds, comparatively more attractive than low-yielding bank deposit accounts, and people have moved money to them in the past few months. That made banks that relied on cheap deposits vulnerable, including Silicon Valley Bank and First Republic Bank.
• PacWest, which said deposit outflows stabilized and even reversed since the end of the first quarter, also said it was looking at strategic asset sales to maximize liquidity. It moved its $2.7 billion lender finance portfolio to the category “held for sale.”
• Wells Fargo CEO Charlie Scharf said Tuesday at the Milken Institute Global Conference that regulators performed as they were supposed to function amid the banking sector turmoil of March and April. The majority of banks being monitored by Wells are “strong,” he said.

What’s Next: Futures traders overwhelmingly expected the Fed will raise rates another quarter of a percentage point Wednesday, according to CME’s FedWatch tool. About 85% of traders expect the Fed to pause its rate increases in June.

—Liz Moyer

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Tech CEOs Invited to White House AI Safety Summit

The chief executives of Microsoft and

Alphabet are set to meet top government officials Thursday amid concerns about the safety of Artificial Intelligence, which has surged in popularity and usage this year.

• Vice President Kamala Harris is expected to host Microsoft’s Satya Nadella and Alphabet’s Sundar Pichai, as well as the chief executives of OpenAI and artificial intelligence start-up Anthropic, according to multiple reports.
• An invitation to the CEOs, seen by Reuters, mentioned President Joe Biden’s “expectation that companies like yours must make sure their products are safe before making them available to the public.”
• Separately, education technology firm Chegg showed Monday not everyone can be an AI winner. It warned more students are turning to OpenAI’s ChatGPT for help with their homework, hurting its own new customer growth rate in March. The stock fell 48.4% Tuesday.

What’s Next: The Biden administration is weighing possible future regulation on AI. The Commerce Department put out a request for public comment last month on what measures may be needed to ensure that “AI systems are legal, effective, ethical, safe, and otherwise trustworthy.”

—Callum Keown

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AMD Posts Earnings Beat, Shares Drop Amid Lower Outlook

Advanced Micro Devices beat earnings expectations for the March quarter, but the chip maker offered a disappointing revenue forecast of between $5 billion and $5.6 billion for the current quarter. At the midpoint of that range, the outlook is slightly below expectations. Shares fell 6% in late trading.

• AMD reported first-quarter adjusted earnings per share of 60 cents and revenue of $5.4 billion. Data-center unit revenue was roughly flat from a year earlier, while revenue in its client PC business fell 65%, and gaming business dropped 6%.
• The results compare with auto chip supplier NXP Semiconductor , which topped Wall Street expectations after reporting late Monday. Another big supplier to the auto market, Texas Instruments , said sales to the auto industry remain strong.
• AMD’s shares are up 39% so far this year, while the PHLX Semiconductor Index is up 18%; the S&P 500 is up 7%; and the tech-heavy Nasdaq Composite is up 15%.
• More widely, demand for personal computers has been deteriorating. The research firm IDC said worldwide shipments of PCs fell 29% in the March quarter from a year earlier. That follows a 28% drop from the December quarter and a 15% decline in the September quarter.

What’s Next: AMD Chief Executive Lisa Su said the company remains “well positioned” to grow the cloud and enterprise business in the second half of the year, citing server processors. She expects the client PC segment to grow in the June quarter from the prior quarter and into the second half of the year.

—Tae Kim and Janet H. Cho

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Ford Motor Returns to Profit But Faces Affordability Concerns

Ford Motor ’s first-quarter results beat Wall Street’s expectations, returning to profitability after a loss one year ago and bouncing back from supply-chain issues. But shares dropped 2% after hours, over worries that a recession could make affordability an issue for the auto maker.

• Ford reported earnings per share of 63 cents from sales of $41.5 billion. Earlier Tuesday, the auto company cut the price of its electric Mustang Mach-E, the second price adjustment this year. It is also adopting a lower-cost battery. Rival Tesla is also cutting prices.
• Reporting under its new business segments for the first time, Ford’s traditional car business posted $2.6 billion operating profit; its commercial business generated $1.4 billion; and its electric vehicle business lost $722 million. The EV business is expected to lose about $3 billion in 2023.
• Separately, Tesla’s entry-level Model 3 is about 14% cheaper in the U.S. than at the start of the year. Tesla CEO Elon Musk has said he’s willing to lower prices to improve market share, even if it hurts profitability.
• More broadly, declining affordability threatens new car demand and new car prices. At the end of the first quarter, a record 17% of Americans financing their vehicles were paying more than $1,000 a month. Two years ago, only about 6% of people financing vehicles had $1,000 car payments.

What’s Next: Ford still expects full-year operating profit of $9 billion to $11 billion. “There’s a lot of the year in front of us,” Chief Financial Officer John Lawler said, when asked why guidance wasn’t raised. Analysts project 2023 operating profit of $9.6 billion, at the lower end of Ford’s range.

—Al Root and Janet H. Cho

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Two Biotech IPOs Coming Thursday, Including J&J’s Kenvue

Two healthcare-focused initial public offerings coming Thursday— Johnson & Johnson ’s consumer healthcare spinoff Kenvue and California-based biotech Acelyrin—could be a hopeful sign for the sector. After a flood of IPOs in 2020 and 2021, the tap ran dry last year, with just a handful of offerings.

• Kenvue, maker of the Tylenol, Band-Aid, and Listerine brands, is expected to raise more than $3 billion for a valuation of up to $43 billion. Acelyrin, which specializes in immunology drugs, aims to raise $400 million at $16 to $18 a share.
• IPOs play a key role in biotech, helping young companies amass enough money to move their drugs from development through regulatory approval. But after about 200 IPOs in 2020-2021, only 20 are trading above their offering price, and investors have cooled on the sector.
• Interest may be returning. Structure Therapeutics had its IPO earlier this year at $15 a share, and is now trading at $23.92. Merck ’s $10.8 billion deal last month for Prometheus Biosciences, also focused on immunology drugs, could help whet investors’ appetites for Acelyrin.
• Immunology drugs are a hot area that has produced some of the biggest biopharma blockbusters in recent years. Acelyrin’s lead drug, izokibep, is the subject of late-stage trials for the treatment of certain skin conditions and forms of arthritis.

What’s Next: Pfizer ’s merger hot streak included the $41.2 billion deal for biotech Seagen in March, but the streak is ending. CEO Albert Bourla and CFO David Denton told Barron’s after beating expectations for the quarter that they would be turning to share buybacks and increased dividend payouts.

—Josh Nathan-Kazis and Janet H. Cho

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Dear Quentin,

I’ve just moved to the U.S. to join my family, and I have about $20,000 in my bank account, and I’m not sure how to invest it. I have no need for the money at the moment, but I’ve applied for a master’s program and want to fill out a Free Application for Federal Student Aid (FAFSA) form.

My child, who is four, is back home in school with my parents for now. I’m due to give birth to a second child in July. Basically, $20,000 is all I have to invest for the next few years until I’m done with school. My husband and I will probably purchase a house at some point.

Should I use some of the money I have to pay the interest on the financial-aid loan throughout the two years of school, or should I invest part of it in CDs and part in stocks? How should I invest my money for the next 2-5 years?

—New Immigrant

Read The Moneyist’s response here.

—Quentin Fottrell

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner