Dow Jones futures, along with S&P 500 futures and Nasdaq futures, edged higher overnight as Credit Suisse announced it will borrow up to $54 billion from the Swiss National Bank to ease contagion fears.
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The attempt at the stock market rally had another wild session on Wednesday, with major indices initially falling but far from bottoms and the Nasdaq hoping for a gain. Fear of Swiss giant CreditSuisse (CS) prompted another sell-off in banking stocks, including well-capped global giants such as; JPMorgan Chase (JPM).
Government bond yields plummeted, particularly the two-year yield, but they also hit lows. Ominously, government bond trading, one of the deepest and safest markets in the world, is facing diminishing liquidity.
Crude oil tumbled to a 15-month low and copper also tumbled as investors fear worries in banks and financial markets will spill over into the broader economy.
Microsoft (MSFT), Apple (AAPL), modern micro devices (AMD), meta platforms (META), salesforce.com (CRM) and NVIDIA (NVDA) are showing strength or even contributing to gains. AMD, Meta and CRM shares are hovering just above the buy points. Microsoft and Apple stocks move towards official buy points with MSFT likely actionable. Nvidia stock, which is one of the strongest performers in 2023, is currently in the process of being extended.
Nvidia stocks and meta platforms are on the IBD leaderboard. META stocks are on SwingTrader. MSFT shares are on the IBD Long-Term Leaders list. CRM stock is on the IBD 50 with Salesforce selected as the IBD 50 stock for observation on Wednesday.
The video embedded in the article discussed Wednesday’s Whipsaw market action and analyzed AMD stocks, Salesforce and Duolingo (DUOLE).
key income
software giant Adobe (ADBE) and Teenage Discounters five below (FIVE) reported after close of trading.
ADBE shares rose 5% in late trade as Adobe slightly beat first-year guidance and raised full-year guidance. Shares closed down 0.1% at 333.61 on Wednesday, trading below the 50-day and 200-day moving averages.
FIVE stock fell 3% overnight as Five Below’s earnings were in line but guidance was low. Shares edged up 0.2% to 198.17, holding support at the 50-day moving average after an orderly pullback.
Dow Jones futures today
Dow Jones futures rose 0.3% from fair value and turned higher as Credit Suisse tapped into SNB funds. S&P 500 futures were up 0.4%. Nasdaq 100 futures were up 0.5%.
The 10-year government bond yield edged up 2 basis points to 3.51%, offsetting losses on Credit Suisse borrowing.
Crude oil futures edged higher.
Keep in mind that overnight action in Dow futures and elsewhere doesn’t necessarily translate to actual trading in the next regular trading session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Attempted stock market rally on Wednesday
The stock market rally suffered heavy losses early in the session but barely recovered to close mixed.
The Dow Jones Industrial Average fell 0.9% in trading on Wednesday. The S&P 500 Index lost 0.7%. The Nasdaq Composite rose less than 0.1%. Small-cap Russell 2000 fell 1.7%.
bank stocks
Credit Suisse sold on Wednesday as its main shareholder, the Saudi National Bank, ruled out investing more money in the ailing Swiss giant. This sent banks in Europe and around the world down sharply.
CS shares, which have been ailing for years, hit a record intraday low of 1.75. Shares closed up 14% at 2.16.
The Swiss National Bank said shortly before the US market closed that it would provide liquidity to Credit Suisse. On Wednesday evening, Credit Suisse decided to borrow up to 50 billion Swiss francs ($53.7 billion) from the SNB.
In the US, JPM shares, Wells Fargo (WFC), Bank of America (BAC) and Citigroup (C) all slightly undercut last week’s lows. JPM stock fell 4.7%, nearing its 200-day moving average and hitting a 2023 low along with Citigroup. WFC stock hit an eight-month low, while BofA fell to its lowest level since late 2020.
Regional banks were mixed. Bank of the First Republic (FRC) plunged 21% as S&P Global cut its credit rating four notches to junk status. But some regional and superregional banks went on including Western Alliance Bancorp (WHALE).
The Financial Select SPDR ETF (XLF) tumbled 2.7%, with JPMorgan, Citigroup, Wells Fargo and BAC stocks all being big 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 reviewing options, including a possible sale, Bloomberg reported Wednesday night, citing sources. FRC stock rose more than 8%.
raw materials
US crude futures fell 5.2% to $67.61 a barrel, its lowest price in 15 months. Copper prices fell 3.8% to their worst close since Jan. 5.
Treasury returns
The 10-year government bond yield slipped 14 basis points to 3.49%. For the day, the return hit 3.39%, not far from the Feb. 2 low of 3.33%. The 2-year Treasury yield fell 25 basis points to 3.97% after falling to 3.72% on the day. A week ago, just before the SVB financial crisis hit, the 10-year yield was at 3.97%, while the 2-year was at 5.06%.
Bank fears and Fed rate hikes are driving Treasury yields lower. Weaker economic data on retail sales, producer prices and the New York Fed’s Empire State Manufacturing Index contributed to the slowdown.
Despite collapsing Treasury yields, the dollar rose amid a global safe-haven onslaught from Credit Suisse concerns. The greenback is near recent highs.
Fed rate hike rates
A week ago, markets were betting on a 50 basis point rate hike on March 22, followed by at least two more quarter point hikes.
But after Wednesday, investors see a 50/50 chance that the Fed will pause next week. You see a quarter point hike through the end of the May meeting. But markets then anticipate several rate cuts, including a 50-point move in June.
ETFs
Among growth ETFs, innovator IBD 50 ETF (FFTY) fell 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) was down 0.2%, with Microsoft and CRM stocks being top IGV holdings along with Adobe. The VanEck Vectors Semiconductor ETF (SMH) fell 1.1%. NVDA stocks and AMD are important SMH stocks.
The SPDR S&P Metals & Mining ETF (XME) is down 5.9% and the Global X US Infrastructure Development ETF (PAVE) is down 4%. The US Global Jets ETF (JETS) fell 4.3%. SPDR S&P Homebuilders ETF (XHB) is down 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) was up 0.8% and ARK Genomics ETF (ARKG) was up 0.1%.
The five best Chinese stocks to watch right now
Tech titans show strength
Apple shares rose 0.3% to 152.99. The iPhone giant has a buy point of 157.48 from a flat base formed above the 200-day moving average. The line of relative strength is at a four-month high, reflecting AAPL stock’s outperformance versus the S&P 500 index.
MSFT shares rose 1.8% to 265.44. The Dow Jones giant is forming the right side of a brief consolidation formed just above the 50-day and 200-day moving averages. Microsoft stock is on track to have a flat basis with a buy point of 276.86 after Friday’s close. In a better market, MSFT stock would already be actionable, either as an early entry or as a long-term leader.
CRM shares rose 1 cent to 182.91, staying within range of a 178.94 cup with handle buy point.
AMD shares rose 2.55% to 89.68 after rising 6.6% on Tuesday. Stocks are just below a flat buy point of 89.04, according to MarketSmith analysis.
META stock rose 1.9% to 197.75. The Facebook parent cleared a flat buy point of 197.26 after outperforming some early entries with a 7.25% surge on Tuesday.
Nvidia shares rose 0.7% to 242.28. The chip giant is holding its best level in 11 months but is being lengthened by recent buy points. Ideally, NVDA stock would continue to consolidate for a few more weeks, creating a new base and allowing the fast-rising 50-day price to catch up.
Analysis of the market rally
The stock market rally attempt experienced another rollercoaster ride but ended near session highs.
The Nasdaq, which was down as much as 1.7% on the day, managed to finish higher and held the 50-day and 200-day moving averages. 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 Wednesday’s rally low but held above Tuesday’s intraday low, leaving its rally attempt intact.
The Dow Jones simply undercut Monday’s low, quashing its rally attempt and hitting its worst reading since October. Packed with small bank stocks, Russell 2000 plunged to its lowest level since late 2022.
Technically, investors can start looking for a follow-up day on the Nasdaq to confirm the new rally. An FTD would almost certainly take the Nasdaq 100 and perhaps the Nasdaq Composite above a trendline off the early February highs.
But the other indexes have a lot more work to do. How sustainable is a tech-led rally when banks, commodities and industrials are all sold out?
A possible global financial crisis is far more important, to put it mildly, than, for example, a too-strong or too-weak jobs report. Even minor shifts in positive or negative sentiment can trigger massive market swings. And large swings in a market, such as B. Treasuries will run through stocks, commodities and currencies.
Time the market with IBD’s ETF market strategy
What now
Investing is challenging enough in a clear bull market. Attempting to play a volatile market correction amid a burgeoning financial crisis increases risk exponentially.
Yes, meta stocks, Salesforce, AMD and Microsoft are technically feasible if Apple is closed. A number of other techs are showing bullish action. But when this market breaks down, it will take everything.
At least wait for a following day. That would likely trigger a series of buy signals. But even in this scenario, investors should remain cautious. There is a high risk that another major bank or market headline will trigger abrupt sell-offs.
In the meantime, build your watch lists. Look for stocks with strong relative strength, especially stocks near buy points, but also for leading companies like Nvidia stock.
Read The Big Picture every day to keep up to date with market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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