Dow Jones futures jumped Sunday night, along with S&P 500 futures and Nasdaq futures amid flurry of news. The FDIC and other financial regulators announced that all SVB Financial depositors will get access to all funds Monday morning, while also announcing a plan to limit the contagion. Regulators also said they would close embattled Signature Bank (SBNY). An auction for SVB and Silicon Valley Bank took place Sunday, though no winner has been announced.
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The stock market suffered big losses last week as SVB Financial (SIVB) and crypto bank Silvergate Financial (SI), triggered intense losses for bank stocks.
West Coast financials such as First Republic Bank (FRC) and Western Alliance Bancorp (WAL) were especially hard-hit, but Signature Bank (SBNY) and Charles Schwab (SCHW) were big losers too. JPMorgan Chase (JPM) found support on Friday.
The major indexes sold off hard, breaking multiple areas of support during the week as many leading stocks also came under pressure. Treasury yields plunged, with the pace of Fed rate hikes very much in flux.
Amid a weak, volatile, uncertain market, investors should not be making new position trades and instead be largely or entirely in cash. But keep an eye on stocks holding up near buy points. Palo Alto Networks (PANW), Facebook parent Meta Platforms (META), Ulta Beauty (ULTA), Monolithic Power Systems (MPWR) and United Airlines (UAL) are five stocks showing strength, near buy points. PANW stock has formed a handle on a long consolidation, while META stock has a new flat base. ULTA stock is finding support at key levels. Monolithic Power is working on a long cup-with-handle base while UAL stock has retreated from a buy zone.
Meanwhile, Apple (AAPL) has a new flat base as well. Tesla (TSLA) sold off hard this past week, but did find support at its 10-week line on Friday. TSLA stock is far from being actionable.
But keep an eye on financials, such as FRC stock, WAL, SBNY and SCHW, as well as the XLF financial ETF and KRE regional bank ETF. Also pay attention to well-capitalized giants such as JPMorgan. JPM stock fell sharply last week, but bounced Friday.
Insulet (PODD) will replace SIVB stock in the S&P 500 before Wednesday’s open. PODD stock jumped Friday night.
PANW stock is on the IBD Leaderboard watchlist. MPWR stock is on the IBD Long-Term Leaders watchlist. Monolithic Power, United Airlines and ULTA stock 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 while also analyzing JPMorgan Chase, Palo Alto Networks and META stock.
Dow Jones Futures Today
Dow Jones futures popped 0.8% vs. fair value. S&P 500 futures were up 1.1% and Nasdaq 100 futures jumped 1.2%.
Futures rallied in volatile fashion on the big news from financial regulators Sunday evening.
The 10-year Treasury yield, which plunged last week on safe-haven flows, rose 6 basis points to 3.75%. The 2-year Treasury yield sank 7 basis points to 4.52%, even as most other Treasuries showed modest moves.
Markets are now pricing in quarter-point hikes in March and May, but less than a 50% chance of further moves. A few days ago, markets were expecting 50 basis points on March 22, with at least two more quarter-point hikes after that.
Crude oil prices climbed slightly.
Bitcoin rose sharply Sunday. The cryptocurrency tumbled last week on the Silvergate and SVB collapses.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
FDIC, Regulators Protect SVB Financial Depositors
Shortly after Dow futures opened, the Federal Deposit Insurance Corp. and Federal Reserve issued a joint statement that SVB Financial’s “[d]epositors will have access to all of their money starting Monday, March 13.” They also announced that Signature Bank, which had a lot of crypto exposure, would be closed due to systemic risks. Signature Bank’s depositors also will be protected.
California regulators shut down SVB Financial and its Silicon Valley Bank subsidiary on Friday, the largest bank failure since Washington Mutual in the 2008 financial crisis.
The FDIC started an auction Saturday night for Silicon Valley Bank, with final bids due Sunday afternoon, according to multiple reports. A winner may not be known until Sunday night.
Meanwhile, the Fed is creating a new financial backstop for other banks. The facility will offer loans of up to one year to banks and other institutions. They’ll have to pledge high-quality collateral such as Treasuries, agency debt and mortgage-backed securities. Notably, that collateral will be valued at par, not mark to market. Banks have been sitting on unrealized debt losses as Fed rate hikes sent rates soaring over the past year. That was a big facto in SVB Financial’s collapse.
Hundreds of companies, including many venture capital and tech startups, have deposits or business ties to Silicon Valley Bank. There were reports that many will struggle to meet payroll without access to accounts soon.
SVB and SBNY shareholders and certain unsecured debtholders will not be protected.
Join IBD experts as they analyze leading stocks and market conditions on IBD Live
Stock Market Weekly Action
The stock market started off higher but quickly reversed lower for major losses on Fed rate hike fears and later the SVB Financial and Silvergate shutdowns.
Twice on Friday, stocks bounced as Treasury Secretary Janet Yellen expressed confidence in a “resilient” banking system. But the positive momentum quickly faded.
The Dow Jones Industrial Average tumbled 4.4% in last week’s stock market trading. The S&P 500 index sold off 4.55%. The Nasdaq composite skidded 4.7%. The small-cap Russell 2000 dived 8%.
Apple stock fell just 1.7% for the week to 148.50, holding above its 200-day line. But that’s after reversing from Monday’s intraday high of 156.30, nearly hitting AAPL’s 157.48 buy point.
The 10-year Treasury yield plunged 29 basis points to 3.69% this past week, after hitting a 2023 high of 4.09% on March 2. The 2-year yield tumbled 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% to $76.68 a barrel this past week, but did rise on Friday.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) plunged just over 6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) slumped 3.4%. The iShares Expanded Tech-Software Sector ETF (IGV) gave up 5.7%. The VanEck Vectors Semiconductor ETF (SMH) retreated 3%, with MPWR stock an SMH holding.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) dived 10.9% last week and ARK Genomics ETF (ARKG) 11.4%. Tesla stock is a major holding across Ark Invest’s ETFs. TSLA fell 12.3% for the week, amid fresh price cuts and safety probes. But shares edged up on Friday.
SPDR S&P Metals & Mining ETF (XME) sold off 11.1% last week. The Global X U.S. Infrastructure Development ETF (PAVE) retreated 7.1%. U.S. Global Jets ETF (JETS) descended 4.8, with UAL stock a key component. SPDR S&P Homebuilders ETF (XHB) stepped down 4.85%. The Energy Select SPDR ETF (XLE) gave up 5.3%. The Health Care Select Sector SPDR Fund (XLV) slumped 3.85% to the lowest point since October.
The Financial Select SPDR ETF (XLF) dived 8.5%, with JPMorgan and SCHW stock big holdings. The SPDR S&P Regional Banking ETF (KRE) plummeted 15.7%, its worst weekly loss since the Covid crash in March 2020. SIVB stock and Western Alliance are notable components.
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Market Analysis
The stock market suffered damaging losses this past week, with the major indexes selling off hard and breaking through multiple support levels. The indexes tried to bounce back from early losses Friday, briefly turning positive, before tumbling to fresh lows.
The S&P 500, Nasdaq composite and Russell 2000 tumbled through their 21-day lines early in the week and finished decisively below their 50-day and 200-day moving averages. The S&P 500 and Russell 2000 finished Friday below the close of the Jan. 6 follow-through day.
The Dow Jones is at its worst levels since early November.
Fed chief Jerome Powell’s signal that he favors “faster” rate hikes hit the market on Tuesday-Wednesday. But SVB Financial and crypto bank Silvergate Capital rocked banks late in the week.
A Friday morning rebound attempt fizzled as the FDIC announced SVB Financial’s failure.
If bank contagion fears grow, that would be grim for Wall Street and the economy. However, if SVB Financial’s woes are seen as isolated and broader banking fears quickly fade, that could restore overall market confidence. But that would also likely send Treasury yields and the dollar rebounding higher, with Fed rate hike odds also increasing.
The odds of a half-point Fed rate hike surged from 30% on Monday to over 80% following Fed chief Powell’s testimony, then fell back below 40% on Friday. The odds fell further over the weekend.
Leading stocks also sold off hard last week. A number of names held up for much of the week, but most of those were struggling by Friday’s close.
Up until Thursday, Friday’s jobs report and the upcoming March 14 CPI inflation report seemed like major events. And they are still important. A relatively tame CPI inflation rate could give Fed chief Powell and his colleagues the excuse they need to raise rates by only a quarter-point.
But in the very near term, Wall Street will likely take its cue from the banking sector. So pay attention to banks, from the biggest recent losers such as First Republic to broad ETFs and relative stalwarts such as JPM stock.
JPMorgan was the S&P 500’s second-best stock on Friday, even as SBNY stock, First Republic and Schwab were the worst performers. That’s a sign that investors see JPMorgan as relatively safe. But if JPM stock breaks this past week’s lows, that would be concerning.
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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 shakes out. If conditions clear up in a few days or weeks, new buying opportunities will arise.
Build your watchlists with a focus on the stocks showing strong relative strength. 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 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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