Dow Jones futures were little changed in late trading, along with S&P 500 futures and Nasdaq futures. Credit Suisse, First Republic Bank, Adobe and Five Below were notable movers in extended action.
The equity market’s rally attempt had another wild session, with major indices initially plummeting but recovering well from lows, while the Nasdaq posted gains. Fear of Swiss giant Swiss credit (CS) sparked another wave of selling in banking stocks, including well-capitalized global giants such as JPMorgan Chase (J.P.M.).
Treasury yields plummeted, especially two-year rates, but they also bounced off lows. It is ominous that trading in government bonds, one of the deepest and safest markets in the world, is experiencing declining liquidity.
Crude oil plunged to a 15-month low, with copper also plunging as investors fear the woes of banks and financial markets will spill over to the wider economy.
Microsoft (MSFT), Apple (AAPL), Advanced micro devices (AMD), Meta platforms (META), Salesforce. com (CRM) and Nvidia (NVDA) show strength or even contribute to profit. AMD, Meta and CRM stocks hover just above buy points. Microsoft and Apple stocks are on their way to official buy points, with MSFT arguably usable. The stock of Nvidia, one of the best performing companies in 2023, is currently expanding.
Nvidia stocks and meta platforms are on IBD Leaderboard. META Shares are listed on SwingTrader. MSFT shares are on the IBD Long-Term Leaders list. CRM stocks are on the IBD 50, with Salesforce tapped as Wednesday’s IBD 50 stocks to watch.
The video embedded in the article covered Wednesday’s whipsaw market action and analyzed AMD stock, Salesforce and Duolingo (NEAR).
Software giant Adobe (ADBE) and teen-focused discount retailer Five below (FIVE) reported after the close.
ADBE shares were up 5% in late trading as Adobe slightly topped fiscal Q1 views and raised expectations for the full year. Shares closed down 0.1% to 333.61 on Wednesday, trading below the 50-day and 200-day lines.
FIVE stock fell 3% overnight as Five Below earnings were in line, but the outlook was light. Shares were up 0.2% to 198.17, with support at the 50-day line following an orderly pullback.
Dow Jones Futures Today
Dow Jones futures rose 0.2% from fair value. S&P 500 futures rose 0.3%. Nasdaq 100 futures rose 0.5%.
The yield on 10-year Treasury bills rose 1 basis point to 3.5%. The 2-year rate fell 2 basis points to 3.95%.
Crude oil futures rose more than 1%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally Attempt Wednesday
The stock market rally took sharp losses to start the session, but barely recovered to finish mixed.
The Dow Jones Industrial Average fell 0.9% during Wednesday trading. The S&P 500 index lost 0.7%. The composite Nasdaq rose less than 0.1%. The small-cap Russell 2000 fell 1.7%.
CS shares plunged 14% to 2.16. Shares hit a record low of 1.75 after Saudi National Bank, Credit Suisse’s largest shareholder, ruled out investing more money in the ailing Swiss bank. Credit Suisse has been struggling for years. Many other European banks sold hard.
The Swiss National Bank said shortly before US markets closed that Credit Suisse is solvent but will provide the banking giant with liquidity if needed. That came after Bloomberg reported that Swiss authorities and Credit Suisse were discussing ways to “stabilize” the bank, with a liquidity backstop as an option. A break-up of Credit Suisse or a merger with a Swiss rival UBS (UBS) are more radical possibilities.
That news seemed to strengthen major indices and banking stocks somewhat towards the end.
CS stocks rose solid overnight, extending late-session recovery
In the US, JPM stocks, Wells Fargo (W.F.C.), bank of America (BAC) and Citi group (C) all slightly lower than last week’s lows. JPM shares fell 4.7% and approached the 200-day mark, joining Citigroup to hit a 2023 low. WFC shares hit an eight-month low, while BofA fell to its worst level since late 2020.
Regional banks were mixed. Bank of the First Republic (FRC) fell 21% as S&P Global downgraded its credit rating four notches to junk status. But some regional and super-regional banks progressed, including Bancorp of the Western Alliance (WAL).
The Financial Select SPDR ETF (XLF) fell 2.7%, with JPMorgan, Citigroup, Wells Fargo and BAC all holding large holdings. The SPDR S&P Regional Banking ETF (KRE) fell 1.6%. FRC shares and Western Alliance are among the many components.
First Republic is exploring options, including a possible sale, Bloomberg reported Wednesday night citing sources. FRC shares jumped more than 8%.
US crude oil futures fell 5.2% to $67.61 a barrel, the lowest price in 15 months. The copper price fell by 3.8% to its lowest point since January 5.
The 10-year Treasury yield fell 14 basis points to 3.49%. During the day, the yield reached 3.39%, not far from the February 2 low of 3.33%. The 2-year Treasury yield fell 25 basis points to 3.97% after crashing to 3.72% intraday. A week ago, just before the SVB financial crisis hit, the 10-year rate was 3.97%, while the 2-year rate was 5.06%.
Banking fears and interest rate changes from the Fed are driving lower government bond yields. Weaker economic data on retail sales, producer prices and the New York Fed’s Empire State Manufacturing Index contributed to the cooling.
Despite falling government bond yields, the dollar jumped amid a global retreat of Credit Suisse concerns. The greenback is near recent highs.
Chances of Fed rate hikes
A week ago, markets were betting on a 50 basis point rate hike on March 22, followed by at least two more quarter-point rate hikes.
But after Wednesday, investors see a 50-50 chance of the Fed pausing next week. They do see a quarter-point increase by the end of the May meeting. But after that, markets expect several rate cuts, including a 50-point hike in June.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) was down 0.2%, with large IGV holdings in Microsoft and CRM, along with Adobe. The VanEck Vectors Semiconductor ETF (SMH) lost 1.1%. NVDA stock and AMD are major SMH holdings.
SPDR S&P Metals & Mining ETF (XME) fell 5.9% and the Global X US Infrastructure Development ETF (PAVE) fell 4%. US Global Jets ETF (JETS) fell 4.3%. SPDR S&P Homebuilders ETF (XHB) fell 2.2%. The Energy Select SPDR ETF (XLE) fell 5.4%. The Health Care Select Sector SPDR Fund (XLV) fell 0.1%
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) rose 0.8% and ARK Genomics ETF (ARKG) rose 0.1%.
Five best Chinese stocks to watch right now
Tech Titans show strength
Apple shares rose 0.3% to 152.99. The iPhone giant has formed a buy point of 157.48 from a flat base above the 200-day line. The relative strength line is at a four-month high, reflecting AAPL stock’s outperformance against the S&P 500 index.
MSFT shares rose 1.8% to 265.44. The Dow Jones giant is building on the right side of a short consolidation that formed just above the 50-day and 200-day lines. Microsoft shares are on track to have a flat base after Friday’s close with a buy point of 276.86. In a better market, MSFT stock would already be useful, either as an early entry or as a long-term leader.
CRM shares were up 1 cent at 182.91, within range of a buy point of 178.94 cup with handle.
AMD shares gained 2.55% to 89.68 after rising 6.6% on Tuesday. According to MarketSmith’s analysis, the stock is just below a flat-base buy point of 89.04.
The META share rose 1.9% to 197.75. The Facebook parent cleared a buy point of 197.26 flat-base after outselling some early entries with Tuesday’s 7.25% spike.
Nvidia shares were up 0.7% to 242.28. The chip giant is holding onto its best level in 11 months, but extended from recent buy points. Ideally, NVDA stock would consolidate for a few more weeks, forging a new base and giving the rapidly rising 50 days to catch up.
Analysis of the market rally
The attempted rally in the stock market had another roller-coaster session, but ended near session highs.
The Nasdaq, which fell as much as 1.7% intraday, managed to end higher at close, holding the 50-day and 200-day lines. The Nasdaq 100, which includes the 100 largest non-financial Nasdaq components such as Microsoft, Apple, Nvidia, Meta and AMD, rose 0.5%.
The S&P 500 fell below the low of Wednesday’s rally but remained above Tuesday’s intraday low, so the rally attempt is intact.
The Dow Jones simply broke Monday’s low, destroyed its rally attempt and hit its worst levels since October. The Russell 2000, filled with small banking stocks, fell to its worst level since late 2022.
Technically, investors can look for a follow-up day on the Nasdaq to confirm the new rally. An FTD would almost certainly push the Nasdaq 100, and perhaps the Nasdaq composite, above a trendline from the early February highs.
But the other indexes have a lot more work to do. How sustainable is a tech-led rally as banks, commodity players and industrials sell off?
A possible global financial crisis is much more important, to say the least, than whether, say, a jobs report is too strong or too weak. So even small shifts in positive or negative sentiment can cause huge market swings. And huge swings in one market, like Treasuries, will ripple through stocks, commodities and currencies.
Time the market with IBD’s ETF market strategy
What to do now
Investing is challenging enough in a clear bull market. Trying to play off a volatile market correction in the midst of a burgeoning financial crisis exponentially increases the risk.
Yes, Meta-stocks, Salesforce, AMD and Microsoft are technically doable with Apple nearby. A number of other techs are showing bullish action. But if this market falls lower, everything will go down.
In any case, wait for a follow-up day. That would probably trigger some buy signals. But even in that scenario, investors should remain cautious. The risks are high that another major banking or market news will trigger an abrupt sell-off.
Meanwhile, build up your watchlists. Look for stocks with strong relative strength, especially those near buy points, but also leaders like Nvidia stocks.
Read The Big Picture every day to stay in sync with market direction and leading stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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