Dow Jones futures were little changed after hours, along with S&P 500 futures and Nasdaq futures.
The stock market rally attempt had another wild session, with the major indexes initially tumbling but coming well off lows, with the Nasdaq eking out a gain. Fears about Swiss giant Credit Suisse (CS) triggered another wave of selling in bank stocks, including well-capitalized global giants such as JPMorgan Chase (JPM).
Treasury yields plunged, especially the two-year yield, but they also came off lows. Ominously, trading in Treasuries, among the deepest and safest markets in the world, is seeing declining liquidity.
Crude oil plummeted to a 15-month low with copper also tumbling, as investors fear that bank and financial market woes will spill over into the broader economy.
Microsoft (MSFT), Apple (AAPL), Advanced Micro Devices (AMD), Meta Platforms (META), Salesforce.com (CRM) and Nvidia (NVDA) are showing strength or even adding to gains. AMD, Meta and CRM stock are hovering just above buy points. Microsoft and Apple stock are moving toward official buy points, with MSFT arguably actionable. Nvidia stock, among the strongest performers in 2023, is currently extended.
Nvidia stock and Meta Platforms are on IBD Leaderboard. META stock is on SwingTrader. MSFT stock is on the IBD Long-Term Leaders list. CRM stock is on the IBD 50, with Salesforce tapped as Wednesday’s IBD 50 stock to watch pick.
The video embedded in the article discussed Wednesday’s whipsaw market action and analyzed AMD stock, Salesforce and Duolingo (DUOL).
Key Earnings
Software giant Adobe (ADBE) and teen-focused discounter Five Below (FIVE) reported after the close.
ADBE stock rose solidly in late trading as Adobe slightly topped fiscal Q1 views and raised full-year guidance. Shares closed up 0.1% to 333.61 on Wednesday, trading below the 50-day and 200-day lines.
FIVE stock fell overnight as Five Below earnings were in line but guidance was light. Shares edged up 0.2% to 198.17, holding support at the 50-day line after an orderly pullback.
Dow Jones Futures Today
Dow Jones futures edged lower vs. fair value. S&P 500 futures were flat. Nasdaq 100 futures climbed 0.2%.
Crude oil futures rose more than 1%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market 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 suffered sharp losses to start the session, but rallied to close mixed, barely.
The Dow Jones Industrial Average retreated 0.9% in Wednesday’s stock market trading. The S&P 500 index shed 0.7%. The Nasdaq composite rose less than 0.1%. The small-cap Russell 2000 tumbled 1.7%.
Bank Stocks
CS stock dived 14% to 2.16. Shares hit a record low of 1.75 after Saudi National Bank, Credit Suisse’s top shareholder, ruled out investing more money into the ailing Swiss bank. Credit Suisse has been struggling for many years. Many other European banks sold off hard.
The Swiss National Bank said shortly before U.S. 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 one option. A Credit Suisse breakup or a merger with Swiss rival UBS (UBS) are more radical possibilities.
That news seemed to bolster the major indexes and bank stocks somewhat into the close. CS stock rose solidly overnight.
In the U.S., JPM stock, 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 line, setting a 2023 low along with Citigroup. WFC stock hit an eight-month low while BofA sank to its worst levels since late 2020.
Regional banks were mixed. First Republic Bank (FRC) tumbled 21% as S&P Global slashed its credit rating by four notches to junk status. But some regional and superregional banks advanced, including Western Alliance Bancorp (WAL).
the Financial Select SPDR ETF (XLF) slumped 2.7%, with JPMorgan, Citigroup, Wells Fargo and BAC stock all big holdings. The SPDR S&P Regional Banking ETF (KRE) declined 1.6%. FRC stock and Western Alliance are among the many components.
Commodities
U.S. crude oil futures plunged 5.2% to $67.61 a barrel, the lowest price in 15 months. Copper prices tumbled 3.8% to their worst close since Jan. 5.
Treasury Yields
The 10-year Treasury yield skidded 14 basis points to 3.49%. Intraday, the yield hit 3.39%, not far from the Feb. 2 low of 3.33%. The 2-year Treasury yield dived 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 yield was at 3.97% while the 2-year was at 5.06%.
Banking fears and Fed rate shifts are driving Treasury yields lower. Weaker economic data on retail sales, producer prices and the New York Fed’s Empire State Manufacturing Index added to the cooling.
Despite the tumbling Treasury yields, the dollar jumped amid a global safe-haven rush from Credit Suisse concerns. The greenback is near recent highs.
Fed Rate Hike Odds
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 that the Fed will pause next week. They do see a quarter-point hike by the end of the May meeting. But markets then expect several rate cuts, including a 50-point move in June.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) retreated 1.8%. The iShares Expanded Tech-Software Sector ETF (IGV) dipped 0.2%, with Microsoft and CRM stock major IGV holdings, along with Adobe. The VanEck Vectors Semiconductor ETF (SMH) gave up 1.1%. NVDA stock and AMD are major SMH holdings.
SPDR S&P Metals & Mining ETF (XME) dived 5.9% and the Global X U.S. Infrastructure Development ETF (PAVE) slumped 4%. U.S. Global Jets ETF (JETS) descended 4.3%. SPDR S&P Homebuilders ETF (XHB) stepped down 2.2%. The Energy Select SPDR ETF (XLE) plunged 5.4%. The Health Care Select Sector SPDR Fund (XLV) slipped 0.1%
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) rose 0.8% and ARK Genomics ETF (ARKG) edged up 0.1%.
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Tech Titans Show Strength
Apple stock edged up 0.3% to 152.99. The iPhone giant has a 157.48 buy point from a flat base formed above the 200-day line. The relative strength line is at a four-month high, reflecting AAPL stock’s outperformance vs. the S&P 500 index.
MSFT stock advanced 1.8% to 265.44. The Dow Jones giant is building the right side of a short consolidation formed just above the 50-day and 200-day lines. Microsoft stock is on track to have a flat base with a 276.86 buy point 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 stock edged up 1 cent at 182.91, holding in range from a 178.94 cup-with-handle buy point.
AMD stock gained 2.55% to 89.68, after jumping 6.6% on Tuesday. Shares are just below an 89.04 flat-base buy point, according to MarketSmith analysis.
META stock climbed 1.9% to 197.75. The Facebook parent cleared a 197.26 flat-base buy point, after topping some early entries with Tuesday’s 7.25% spike.
Nvidia stock inched 0.7% higher to 242.28. The chip giant is holding at its best levels in 11 months, but is extended from recent buy points. Ideally, NVDA stock would consolidate for a few more weeks, forging a new base and allowing the fast-rising 50-day to catch up.
Market Rally Analysis
The stock market rally attempt had another roller-coaster session, but finished near session highs.
The Nasdaq, down as much as 1.7% intraday, managed to edge higher by the close, holding the 50-day and 200-day lines. The Nasdaq 100, which includes the 100 largest nonfinancial 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 held above Tuesday’s intraday low, so its rally attempt is intact.
The Dow Jones simply undercut Monday’s low, wiping out its rally attempt and hitting its worst levels since October. The Russell 2000, filled with small bank stocks, tumbled to its worst levels since the end of 2022.
Technically, investors can start looking for a follow-through day on the Nasdaq to confirm the new rally. A 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 if banks, commodity plays and industrials are selling off?
A potential global financial crisis is, to put it mildly, far more important than whether, say, a jobs report is too strong or weak. So even minor shifts in positive or negative sentiment can trigger massive market swings. And huge swings in one market, such as Treasuries, will ripple through stocks, commodities and currencies.
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What To Do Now
Investing is challenging enough in a clear bull market. Trying to play a volatile market correction amid a budding financial crisis exponentially increases the risk.
Yes, Meta stock, Salesforce, AMD and Microsoft are technically actionable with Apple close. A number of other techs are showing bullish action. But if this market breaks lower, it’ll take everything down.
At the very least, wait for a follow-through day. That would likely trigger a number of buy signals. But investors should still remain cautious even in that scenario. Risks are high that another big banking or market headline will trigger abrupt sell-offs.
In the meantime, build up your watchlists. Look for stocks with strong relative strength, especially those near buy points but also leaders such as Nvidia stock.
Read The Big Picture every day to stay in sync with the 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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The post Dow Jones Closes Off 2023 Lows; These Titans Lift Nasdaq, But Market Strains Build appeared first on Investor’s Business Daily.