Dow Jones futures traded off early Wednesday, along with S&P 500 futures and Nasdaq futures, with Credit Suisse (CS) fell as its top shareholder ruled out investing more in the ailing Swiss bank.
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The stock market jumped on Tuesday, with the major indexes up sharply despite wilting for most of the afternoon. February’s CPI inflation rate cooled in line with expectations, but the report took second billing to the banks.
A market rally attempt is underway. But investors should be cautious in such a volatile, news-driven environment.
A number of stocks showed bullish action on Tuesday. Meta platforms ( META ) gave a buy signal as the Facebook and Instagram parent announced a new wave of layoffs. Tesla (TSLA) bounced back from key support. Boeing (BA), Country house (LNTH), Materials used (AMAT), MSCI (MSCI), Fortinet (FTNT) and MercadoLibre (MELI) all trade near points of purchase.
The META stock is on SwingTrader. FTNT shares and MSCI are on IBD Long-Term Leaders. MELI stock, Monolithic Power, Fortinet and Lantheus are on the IBD 50. Fortinet and AMAT stock are on the IBD Big Cap 20.
The video embedded in the article discussed Tuesday’s market action and analyzed Meta Platforms, Fortinet and BA stocks.
Credit Suisse leads the sale of European banks
Credit Suisse shares fell more than 20% in premarket trading as Saudi National Bank, its top shareholder, ruled out further investment. The Swiss banking giant has plunged in recent months, revealing poor internal controls earlier this week. Credit default swaps indicate increasing risk for Credit Suisse. the German bank (DB) and other European financials were notably losers early Wednesday. Trading in several European banks was halted.
The sale affected major American banks in pre-market trading, such as JPMorgan Chase (JPM) and Wells Fargo (WFC), which rose on Tuesday.
Among regional banks early Wednesday, First Republic Bank (FRC) rose slightly while Western Alliance Bancorp (WAL) dipped and PacWest Bancorp (PACW) tumbled. All three made big comebacks on Tuesday despite finishing well on highs. Charles Schwab (SCHW) also retreated after Tuesday’s bounce.
The Financial Select SPDR ETF ( XLF ) retreated early Wednesday, with JPMorgan, Wells and SCHW holdings. The SPDR S&P Regional Banking ETF (KRE) fell after Tuesday’s setback. FRC and WAL are among the many holdings.
Lennar’s income
Lennar (LEN) late Tuesday slightly beat first-quarter fiscal estimates while the homebuilder led on second-quarter orders.
LEN shares rose over 1% in extended trading. Shares rose 1.8% to 100.77 on Tuesday, bouncing off their 50-day line. The Lennar share is working with a buy point of 109.38. Investors can use a move above Tuesday’s intraday high of 101.78 as an early entry.
Dow Jones Futures today
Dow Jones futures fell 1.8% relative to fair value, off nearly 600 points. S&P 500 futures retreated 1.85% and Nasdaq 100 futures sold 1.4%.
The 10-year government yield fell 11 basis points to 3.52%. The 2-year yield fell 18 basis points to 4.04% after briefly undershooting the 4% level.
Markets are leaning towards a quarter-point Fed rate hike on March 22, but see a pause in May and rate cuts over the summer.
Even with falling US interest rates, the dollar rose.
Crude oil futures fell more than 1%. Copper futures fell over 2%.
China’s industrial production for January-February rose 2.4% from a year earlier, below views for 2.6%. Retail sales rose 3.5%, in line with forecasts. Fixed investment 5.5%, tops consensus, but property investment fell 5.7%.
Keep in mind that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular session.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Attempt at a stock market rally
The stock market rose sharply on Tuesday, but with some big ups and downs.
The Dow Jones Industrial Average rose 1.1% in Tuesday’s trading. The S&P 500 rose 1.65%, with FRC shares, Schwab and Meta Platforms the best performers. The Nasdaq index rose 2.1 percent. The small-cap Russell 2000 claimed 1.9%.
The US crude oil price fell 4.6% to $71.33 a barrel. Copper futures fell 1.45%.
The 10-year government yield rose 12 basis points to 3.63%. The 2-year government interest rate rose 19 basis points to 4.22%.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF ( FFTY ) rose 2.5%. The iShares Expanded Tech-Software Sector ETF ( IGV ) rose 2.3%. The VanEck Vectors Semiconductor ETF ( SMH ) jumped 3%.
Reflecting more speculative history stocks, ARK Innovation ETF (ARKK) 2.1% and ARK Genomics ETF (ARKG) 1.5%. Tesla stock is a large holding across Ark Invest’s ETFs.
The SPDR S&P Metals & Mining ETF (XME) rose 0.8% and the Global X US Infrastructure Development ETF (PAVE) rose 1.7%. The US Global Jets ETF (JETS) fell 0.6 percent. The SPDR S&P Homebuilders ETF (XHB) rose 1.4%, with the LEN stock an XHB stake. The Energy Select SPDR ETF (XLE) rose 1%. The Health Care Select Sector SPDR Fund ( XLV ) was up 0.9%.
Top five Chinese stocks to watch now
Tesla shares
TSLA stock jumped 5% Tuesday to 183.26 after finding support at the 50-day line on Monday, although shares remain below the 21-day line. Tesla’s strong China EV registrations drove Tuesday’s gains. The EV giant is working on a possible bottom base with a buy point of 217.75. It is forming below the 200-day mark, but a breakout will almost certainly mean clearing the 200-day.
Meta Stock
Meta Platforms announced on Tuesday that it would cut another 10,000 jobs over the coming months. It confirmed reports of another big wave of layoffs, after 11,000 cuts in November.
META shares jumped 7.25% to 194.02. Shares are working on a buy point at 197.26 from a flat base forged after the Q4 earnings gap widened, according to MarketSmith analysis. . But investors could have used a downtrend line or a move above the March 7 high of 190.36 as an early entry.
The relative strength line is at its highest levels since May, reflecting the META stock’s outperformance in recent months compared to the S&P 500 index.
Shares close to buy points
BA stock broke above its 50-day line on Tuesday morning, flirting with a trendline entry after rallying on Monday from a two-month low. But the Dow Jones aerospace giant faded to close up just 1.9% at 207.28, below its 50-day. Boeing stock is on track to make a new flat base after Friday with a buy point of 221.43.
On Tuesday, Boeing won 78 confirmed orders for 787 Dreamliner jets from two Saudi airlines, with options for 43 more.
LNTH shares rose 3.2% to 73.02 on Tuesday, although shares closed lower. On Monday, the Lantheus share rose back from the 21-day line. Investors may still use 75.20 a buy point for cup with handle, but 77.04 may soon be a better handle.
AMAT stock fell 3.9% to 120.34 on Tuesday after bouncing off its 50-day line on Monday. Shares are working on a 125.02 flat base, and are part of a base-on-base formation. Applied Materials stock could use a move above Tuesday’s high of 121.24 as an early entry. The RS line for AMAT stock is at a 52-week high.
MSCI shares rose 3.8% to 548.25, extending Monday’s bounce from the 50-day line. The MSCI stock has a buy point at 572.60 from a long, deep cup with handles. But it flashed an early entry from either a downtrend line or move above the March 7 intraday high of 547.92.
FTNT shares climbed 2.7% to 60.89, after a reversal to the upside on Monday. Fortinet is working with a buy point of 63.12 for a consolidation going back to July or April of last year.
MELI stock jumped 4.5% to 1,214.96, back above the 21-day line after finding support at the 10-week line on Monday. Investors can still use 1,250.58 as a valid buy point from a recent flat base.
Stock market analysis
The major indices advanced strongly until almost noon, faded in the afternoon before rising again in the last 40 minutes.
The Nasdaq Composite rebounded above its 50-day and 200-day moving averages and closed not far from intraday highs.
The S&P 500 and Dow Jones rose but hit resistance near their 200-day lines. The Russell 2000, with a heavy banking concentration, rose initially but closed well off early tops.
Winners trumped losers by 3-to-1 on the NYSE and nearly 2-to-1 on the Nasdaq.
Bank stocks opened strongly, but almost immediately began to fall back. But they moved on, often with great gains.
Tuesday marked day two of a market rally attempt on the Nasdaq. A follow-up day may take place late this week or next week to confirm the rally attempt.
If FRC shares, Western Alliance, PacWest and the broader banking sector continue to rally, the rally attempt could show further progress. But any sense that banking contagion will spread will almost certainly send the economy and the overall market sharply lower.
That looks set to happen on Wednesday morning, with Dow futures falling on a Credit Suisse-led selloff.
Many stocks have shown resilience in the past week. Tokens, including AMAT shares, continue to perform well. Megacaps look better, including META stocks, while Tesla stock is pulling back from key support.
Home builders bounce off supports within bases or handles, including LEN stock.
Time the market with IBD’s ETF market strategy
What to do now
A stock market rally attempt is underway, but don’t get excited by a strong opening or a strong close. Even bad markets can have one or two good days. Let the rally attempt prove itself.
Bank stocks and the market in general are likely to remain volatile in the near term.
But many stocks are strong. If the market rally has a follow-up day, many names will flash buy signals.
So build your watchlists. Look for stocks that are holding close to buy points. But don’t overlook stocks that are showing relative strength but are extended 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 exchange updates and more.
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200-Day Average: Last Support Line?
