The stock market suffered major losses last week SVB Financial (SIVB) crashed and finally collapsed. SIVB shares, along with cryptobank Silvergate Financial (SI), led to major losses for bank stocks.
west coast financials like Bank of the First Republic (FRC) and Bancorp of the Western Alliance (WAL) were particularly hard hit, however signature bank (SBNY) and Karl Schwab (SCHW) were also big losers. JPMorgan Chase (JPM) found support on Friday.
Major indices rallied, breaking multiple support areas during the week as many leading stocks also came under pressure. Treasury yields plummeted, while the pace of Fed rate hikes fluctuated widely.
Dow Jones futures open Sunday night, along with S&P 500 futures and Nasdaq futures.
In the midst of a weak, volatile, uncertain market, investors should not make new position trades and should be mostly or entirely in cash. But keep an eye on stocks near buying points. Palo Alto Networks (PANW), Facebook parent Meta platforms (META), Ultimate beauty (ULTA), Monolithic energy systems (MPWR) and United Airlines (UAL) are five stocks showing strength near buying points. PANW material has a handle shaped for long consolidation, while META material has a new flat base. ULTA stocks find support at key levels. Monolithic Power is building a long cup-and-handle base as UAL shares have pulled out of a buy zone.
In the meantime, Apple (AAPL) also has a new flat base. Tesla (TSLA) sold hard last week, but found support at the 10-week line on Friday. But TSLA stock is far from usable.
But keep an eye out for financials such as FRC stocks, WAL, SBNY, and SCHW, as well as the XLF financial ETF and KRE regional bank ETF. But also keep an eye out for giants like JPMorgan. JPM shares fell sharply last week, but rebounded on Friday.
Isolate (PODD) replaces SIVB stock in the S&P 500 ahead of Wednesday’s open. PODD shares jumped Friday night.
About 87.5% of Silicon Valley Bank’s $126 billion in deposits as of Dec. 31 exceeded FDIC insurance limits. Friday late, Year (ROKU) revealed that $487 million, or 26% of its cash, is held with SVB, with those deposits “largely uninsured.” ROKU shares fell after hours.
The PANW stock is on the IBD Leaderboard watchlist. MPWR stocks are on the IBD Long-Term Leaders watchlist. Monolithic Power, United Airlines and ULTA are on the IBD 50. Meta Platforms was Friday’s IBD Stock Of The Day.
The video embedded in this article discussed the market action in depth and also analyzed the stocks of JPMorgan Chase, Palo Alto Networks, and META.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.
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 leading stocks and market conditions on IBD Live
Weekly stock market promotion
The stock market started higher, but quickly turned lower on heavy losses from fears of rate hikes by the Fed and later the closures of SVB Financial and Silvergate.
Shares rallied twice on Friday as Treasury Secretary Janet Yellen expressed confidence in a “resilient” banking system. But the positive momentum quickly faded.
The Dow Jones Industrial Average plummeted 4.4% in stock trading last week. The S&P 500 index sold 4.55%. The Nasdaq composite fell 4.7%. The small-cap Russell 2000 fell 8%.
Apple shares fell just 1.7% for the week to 148.50 and remained above the 200-day line. But that’s after reversing Monday’s intraday high of 156.30, and nearly reaching AAPL’s 157.48 buy point.
The 10-year Treasury yield fell 29 basis points last week to 3.69%, after hitting a 2023 high of 4.09% on March 2. The 2-year yield fell 27 basis points to 4.59%, including 31 basis points on Friday and 48 points on Thursday-Friday.
U.S. crude oil futures fell 3.8% last week to $76.68 a barrel, but rose on Friday.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell just over 6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 3.4%. The iShares Expanded Tech-Software Sector ETF (IGV) lost 5.7%. The VanEck Vectors Semiconductor ETF (SMH) fell 3%, with MPWR shares holding an SMH stake.
Reflecting more speculative story stocks, ARK Innovation ETF (ARKK) plunged 10.9% last week and ARK Genomics ETF (ARKG) 11.4% last week. Tesla stock is a major stock in Ark Invest’s ETFs. TSLA fell 12.3% this week amid new price cuts and security investigations. But shares rose on Friday.
SPDR S&P Metals & Mining ETF (XME) sold 11.1% last week. The Global X US Infrastructure Development ETF (PAVE) lost 7.1%. US Global Jets ETF (JETS) fell 4.8, with UAL stocks a major component. SPDR S&P Homebuilders ETF (XHB) fell 4.85%. The Energy Select SPDR ETF (XLE) lost 5.3%. The Health Care Select Sector SPDR Fund (XLV) fell 3.85% to its lowest point since October.
The Financial Select SPDR ETF (XLF) fell 8.5%, with big stocks JPMorgan and SCHW. The SPDR S&P Regional Banking ETF (KRE) plunged 15.7%, its biggest weekly loss since the March 2020 Covid crash. SIVB stocks and Western Alliance are notable components.
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Market analysis
The stock market suffered damaging losses over the past week, with major indices selling hard and breaking multiple levels of support. The indices attempted to recover from early losses on Friday and briefly turned positive before tumbling to new lows.
The S&P 500, Nasdaq Composite and Russell 2000 tumbled through their 21-day lines early in the week, ending significantly below their 50- and 200-day moving averages. The S&P 500 and Russell 2000 closed below the January 6 follow-up day close on Friday.
The Dow Jones is at its worst level since early November.
Fed chief Jerome Powell’s signal that he favors “faster” rate hikes hit the market Tuesday-Wednesday. But SVB Financial and crypto bank Silvergate Capital rocked the banks late in the week.
A Friday morning rebound attempt failed when the FDIC announced the failure of SVB Financial.
If fears of bank contagion mount, it would be grim for Wall Street and the economy. However, if SVB Financial’s woes are seen in isolation and the broader banking scare quickly fades, that could restore overall market confidence. But that would also likely lead to a rise in Treasury yields and a rebound in the dollar, while also increasing the likelihood of rate hikes by the Fed.
The odds of a half-point rate hike by the Fed rose from 30% on Monday to more than 80% following Fed Chief Powell’s testimony, before dropping to below 40% on Friday.
All this uncertainty adds to fears of a hard landing, either through a banking crisis or because the Fed goes too far with rate hikes.
Leading stocks were also sold hard. A number of names held their own for most of the week, but most struggled by Friday’s close.
Until Thursday, Friday’s jobs report and upcoming March 14 CPI inflation report seemed like major events. And they are still important. Relatively subdued CPI inflation could give Fed Chief Powell and his colleagues the excuse to raise rates by just a quarter of a point.
But in the very short term, Wall Street is likely to be guided by the banking sector. So keep an eye out for banks, from the biggest recent losers like First Republic to broad ETFs and relative stalwarts like JPM stocks.
JPMorgan was the second-best stock in the S&P 500 on Friday, while SBNY stocks, First Republic and Schwab were the worst performers. That’s a sign that investors view JPMorgan as relatively safe. But if JPM stock breaks past week’s lows, it would be concerning.
The woes of SVB and Silvergate also affect the tech, biotech and crypto sectors, with the banks having direct or indirect ties to many companies in these sectors, such as Roku.
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What to do now
The stock market is selling off hard amid bad news and even greater uncertainty.
This is not a healthy environment. Investors should be largely or entirely on the sidelines, waiting to see how this plays out. If conditions clear up in a matter of days or weeks, new buying opportunities will arise.
Build your watchlists with a focus on the stocks that are relatively strong. If they’re near potential buy points like META stock, Monolithic Power, or Palo Alto, great. But that’s not the priority right now.
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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