Dow Jones futures were little changed early Wednesday, along with S&P 500 futures and Nasdaq futures, following mixed Chinese economic data.
Lennar (LEN) headlined earnings after the close, with LEN stock signaling a buy signal late.
The stock market jumped Tuesday morning as banks such as First Republic Bank (FRC), Western Alliance Bancorp (WAL), PacWest Bancorp (PACW), Charles Schwab (SCHW) and even KeyCorp (KEY) surged. But banks came well off opening highs.
The major indexes closed with robust gains, despite wilting for most of the afternoon.
The CPI inflation rate was in line with expectations, but the report took second billing to banks.
An market rally attempt is underway. But investors should be cautious amid such a volatile, news-driven environment.
A number of stocks showed bullish action Tuesday. Meta Platforms (META) flashed a buy signal as the Facebook and Instagram parent announced another wave of layoffs. Tesla (TSLA) rebounded from key support.
Boeing (BA), Lantheus (LNTH), Applied Materials (AMAT), MSCI (MSCI), Fortinet (FTNT) and MercadoLibre (MELI) are all trading near buy points after holding up well in the recent market action.
META stock is on SwingTrader. FTNT stock 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 stock.
Dow Jones Futures Today
Dow Jones futures fell 0.1% vs. fair value. S&P 500 futures tilted lower and Nasdaq 100 futures were flat.
The 10-year Treasury yield climbed 4 basis points to 3.67%. The 2-year yield leapt 9 basis points to 4.31%.
Crude oil futures rose 1%.
China’s industrial production for January-February rose 2.4% vs. a year earlier, below views for 2.6%. Retail sales climbed 3.5%, matching forecasts. Fixed-asset investment 5.5%, topping consensus, but real estate investment sank 5.7%.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.
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Lennar earnings easily beat fiscal first-quarter estimates while the homebuilder guided up on Q2 orders.
LEN stock climbed 3.6% in extended trade. Shares rose 1.8% to 100.77 on Tuesday, bouncing from their 50-day line. Lennar stock is working on a 109.38 flat base buy point. Investors could use a move above Tuesday’s intraday high of 101.78 as an early entry.
Stock Market Rally Attempt
The stock market rallied strongly Tuesday, but with some big up and down moves.
The Dow Jones Industrial Average rose 1.1% in Tuesday’s stock market trading. The S&P 500 index popped 1.65%, with FRC stock, Schwab and Meta Platforms the top performers. The Nasdaq composite jumped 2.1%. The small-cap Russell 2000 claimed 1.9%.
U.S. crude oil prices tumbled 4.6% to $71.33 a barrel. Copper futures sank 1.45%.
The 10-year Treasury yield rose 12 basis points to 3.63%. The 2-year Treasury yield leapt 19 basis points to 4.22%. Markets once again expects a quarter-point Fed rate hikes in March and May, but rate cuts over the summer.
Among growth ETFs, the Innovator IBD 50 ETF (FFTY) gained 2.5%. The iShares Expanded Tech-Software Sector ETF (IGV) advanced 2.3%. The VanEck Vectors Semiconductor ETF (SMH) jumped 3%.
Reflecting more-speculative story stocks, ARK Innovation ETF (ARKK) 2.1% and ARK Genomics ETF (ARKG) 1.5%. Tesla stock is a major holding across Ark Invest’s ETFs.
SPDR S&P Metals & Mining ETF (XME) rose 0.8% and the Global X U.S. Infrastructure Development ETF (PAVE) 1.7%. U.S. Global Jets ETF (JETS) dipped 0.6%. SPDR S&P Homebuilders ETF (XHB) stepped up 1.4%, with LEN stock an XHB holding. The Energy Select SPDR ETF (XLE) climbed 1%. The Health Care Select Sector SPDR Fund (XLV) was up 0.9%
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Bank Stocks Rebound In Wild Day
First Republic stock leapt 27% to 39.63 on Tuesday, but backed off intraday highs of 50.97 from shortly after the open. FRC stock plunged 62% on Monday. Tuesday afternoon, S&P Global Ratings put First Republic on watch for a possible credit downgrade. S&P Global said the bank will likely increase wholesale borrowing to shore up liquidity, affecting profit margins.
S&P Global also put Western Alliance and four other regional banks on downgrade watch. WAL stock spiked as much as 53% just after the open. But shares wilted, briefly triggering a double-digit loss before closing up 14%. Western Alliance stock tumbled 47% on Monday, but well off lows. But while WAL stock closed with a modest gain, it’s traded as low as 7.46 and as high as 39.96 in just the last two sessions.
PacWest Bancorp stock spiked nearly 34%, despite slashing intraday gains. PACW plunged 21% on Monday, also well off lows.
SCHW stock gained 9.2%. Shares came off early highs but came off intraday lows as Charles Schwab CEO Walt Bettinger said the brokerage is seeing “significant” inflows. He said he bought Schwab stock on Tuesday.
KeyCorp stock climbed 2.3%, near session lows. KEY stock tumbled 27% on Monday.
JPMorgan Chase (JPM) rose 2.6% in relatively steady Tuesday trading after Monday’s 1.8% decline. Wells Fargo (WFC) jumped 4.6%. Late Tuesday, Wells fled for a mixed shelf offering of up to $9.5 billion, but that doesn’t mean it’ll go ahead with a sale.
The Financial Select SPDR ETF (XLF) advanced 2%. SPDR S&P Regional Banking ETF (KRE) climbed just over 2%, but way off morning highs. JPM stock, Wells Fargo and Charles Schwab are big XLF components. First Republic Bank, WAL stock, KeyCorp and Fifth Third are all KRE holdings.
Moody’s Investors Service lowered the outlook for the banking sector Tuesday morning, but that didn’t have a big impact on the rebound in bank stocks and the overall market.
Banks, especially regional banks, face a profit squeeze as they raise deposit rates or increase borrowing for funding needs. That could be a long-term concern for bank valuations even when contagion fears fade.
Early last week, before the SVB Financial collapse, KeyCorp warned on net interest margins.
TSLA stock jumped 5% on Tuesday to 183.26 after finding support at its 50-day line on Monday, though shares are still below the 21-day line. Tesla’s strong China EV registrations fueled Tuesday’s gains. The EV giant is working on a possible bottoming base with a 217.75 buy point. It’s forming below the 200-day line, but a breakout would almost certainly involve clearing the 200-day.
Meta Platforms announced Tuesday it would cut another 10,000 jobs in the coming months. That confirmed reports of another big wave of layoffs, following 11,000 cuts in November.
META stock jumped 7.25% to 194.02. Shares are working on a 197.26 buy point from a flat base forged following the Q4 earnings gap up, according to MarketSmith analysis. . But investors could have used a downward-sloping trendline or a move above the March 7 high of 190.36 as an early entry.
The relative strength line is at the highest levels since May, reflecting META stock’s outperformance in recent months vs. the S&P 500 index.
Stocks Near Buy Points
BA stock gapped above its 50-day line Tuesday morning, flirting with a trendline entry after rebounding Monday from a two-month low intraday. But the Dow Jones aerospace giant faded to close up just 1.9% to 207.28, below the 50-day. Boeing stock is on track to have a new flat base after Friday with a 221.43 buy point.
On Tuesday, Boeing won 78 confirmed orders for 787 Dreamliner jets from two Saudi airlines, with options for 43 more.
LNTH stock rose 3.2% to 73.02 on Tuesday, though shares closed off lows. On Monday, Lantheus stock rebounded from the 21-day line. Investors could still use 75.20 a cup-with-handle buy point, but 77.04 may soon be a better handle entry.
AMAT stock popped 3.9% to 120.34 Tuesday after bouncing from its 50-day line on Monday. Shares are working on a 125.02 flat base, with is 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 stock rallied 3.8% to 548.25, extending Monday’s bounce from the 50-day line. MSCI stock has a 572.60 buy point from a long, deep cup-with-handle base. But it flashed an early entry from either a down-sloping trendline or moving above the March 7 intraday high of 547.92.
FTNT stock climbed 2.7% to 60.89, after an upside reversal Monday. Fortinet is working on a 63.12 handle buy point on a consolidation going back to last July or April.
MELI stock jumped 4.5% to 1,214.96, back above its 21-day line after finding support at the 10-week line on Monday. Investors could still use 1,250.58 as a valid buy point from a recent flat base.
Stock Market Analysis
The major indexes advanced strongly until nearly midday, wilted in the afternoon before shoring up again in last 40 minutes.
The Nasdaq composite rebounded back 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 bank concentration, soared initially but closed well off early highs.
Winners trumped losers by 3-to-1 on the NYSE and almost 2-to-1 on the Nasdaq.
Bank stocks opened powerfully but almost immediately began falling back. But they did advance, often with hefty gains.
Tuesday marked day two of a market rally attempt on the Nasdaq. A follow-through day could take place late this week or next week to confirm the rally attempt.
If FRC stock, Western Alliance, PacWest and the broader banking sector continue to rebound, then the rally attempt may show further progress. But any sense that bank contagion will spread would almost certainly send financials and the overall market sharply lower.
A lot of stocks have shown resilience over the past week. Chips, including AMAT stock, continue to fare well. Megacaps are looking better, including META stock, while Tesla stock is rebounding from key support.
Homebuilders are bouncing off support within bases or handles, including LEN stock.
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What To Do Now
A stock market rally attempt is underway, but don’t get excited by a strong open or even a strong close. Even bad markets can have one or two good days. Let the rally attempt prove itself.
Bank stocks and the market overall are likely to remain volatile in the short run.
But a lot of stocks are strong. If the market rally has a follow-through day, many names will be flashing buy signals.
So build up your watchlists. Look for stocks that are holding up near buy points. However, don’t neglect stocks that are showing relative strength, but are extended 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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