Dow futures fell slightly overnight, along with S&P 500 futures and Nasdaq futures ahead of the February jobs report on Friday. SVB Financial continued to fall after triggering a sell-off in banking stocks that rocked the broad market on Thursday.
The stock market rally reversed sharply lower on Thursday as questions about banks’ financial statements suddenly came to the fore. The S&P 500 and Nasdaq fell to critical support levels.
Bank stocks also fell SVB Finance (SIVB), the parent company of Silicon Valley Bank, which has surfaced in a string of negative headlines as the cryptocurrency bank has long struggled. Silvergate Capital (SI) said it would close. American bank (Buck), c. B. Morgan Chase (JPM), Wells Fargo (WFC) And Charles Schwab (SCHW) were among the notable losers.
SIVB stock continued to decline of late as fears of bank flight grew.
Investors should be careful, waiting for the market rally to show renewed strength.
ORCL stock fell 4% in late trading after Oracle’s profits trailed and revenue fell. Oracle shares slid 5.9% to 81.75 on Thursday, back from the 50-day line. The stock is operating at 91.32 buy points from a deep cup base with a handle.
ULTA stock is down 2% in extended action. Ulta Beauty’s earnings and revenue topped the views, but same-store guidance was light. The cosmetics retail giant fell 0.8% to 519.93 on Thursday, just below its 21-day streak. ULTA stock doesn’t have a clear buy point.
The Labor Department will release the February jobs report at 8:30 a.m. ET. Economists expect to see non-farm payrolls increase by 223,000, a significant slowdown from 517,000 in January, but that would still be a solid two-month start to the year. The unemployment rate should remain at a 53-year low of 3.4%. Average hourly wage should go up 0.3%, but annual salary should go up 4.7%.
On Thursday, Labor reported that initial jobless claims rose more-than-expected, to their highest number since December. Challenger, Gray and Christmas reported that the announced layoff plans are the highest to start a year since 2009.
The February jobs report, along with next week’s CPI inflation report, could sustain expectations of a half-point rate hike on March 22nd.
Dow jones futures today
Dow futures fell 0.4% against fair value. S&P 500 futures were down 0.5% and Nasdaq 100 futures were down 0.5%.
The 10-year Treasury yield fell 4 basis points, to 3.88%. The two-year yield decreased by 9 basis points, to 4.81%.
The February jobs report is sure to swing into Dow futures, Treasury yields and Fed rate hike expectations.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Stock market rise
The stock market rally got off to a good start on Thursday with jobless claims rising, but quickly reversed lower on bank concerns. Major indices steadily worsened, closing near session lows.
The Dow Jones Industrial Average fell 1.7% in stock market trading Thursday. The S&P 500 fell 1.85%, with SIVB stock, First Republic Bank (FRC) and Schwab’s biggest losers. The Nasdaq Composite slid 2.05%. The small cap Russell 2000, which has a lot of financial components, fell 2.8%.
US crude oil prices fell 1.2 percent to $75.72 a barrel.
The 10-year Treasury yield fell 5 basis points, to 3.92%. The two-year Treasury yield decreased by 16 basis points to 4.9%, while the six-month treasury bill yield decreased by 3 basis points to 5.28%.
Fed rate hike expectations haven’t moved much.
Markets see a 64% chance of a 50bp move on March 22nd, down from 78.6% on Wednesday. The odds are up from about 30% ahead of Fed Chair Jerome Powell’s hawkish testimony on Tuesday. Markets are now pricing in 100 basis points of rate hikes over the next three Fed meetings, with a good chance of more later in the year.
SIVB stock fell 60% to 106.04, the lowest price since 2016. Late Wednesday, SVB Financial announced a $1.75 billion share sale. The parent company of Silicon Valley Bank also cut the guidance. Deposits are dwindling as startups face a funding drought. There are also major concerns about SVB loans for the tech industry.
SIVB stock fell 22% overnight in choppy and heavy trading. Bloomberg reports that Peter Thiel’s Founders Fund is advising companies to withdraw money from Silicon Valley Bank. SVB Financial has yet to price this share offering.
Silvergate Capital, which has been in freefall for months, announced late Wednesday that it would close, with Silvergate Bank liquidated. SI stock is down 42%.
SVB News and Silvergate criticized financial institutions, which are already under pressure as the highly inverted yield curve upends the traditional short-term lending/long lending strategy.
JPM stock slid 5.4%. On Tuesday, JPMorgan fell below the 138.76 buy point and the 50-day line. BAC shares fell 6.2% to their lowest since October. WFC stock also lost 6.2%, falling below its 200-day line after breaking below the 50-day mark earlier in the week.
SCHW stock fell 12.8%, dropping below its 200-day line and the bottom of its base. Bloomberg reported that JPMorgan offered a combined sale of 8.5 million shares of Schwab stock. SCHW stock is at its worst level since October.
Investors will take a closer look at the banks’ books and capital levels, something that hasn’t been a real concern until now. Banks dramatically raise deposit and deposit rates, while long-term interest rates lag behind. Many banks experience large unrealized losses on loans and other securities.
If banks curb lending, it could quickly cool the economy. Meanwhile, the woes of SVB Financial and Silvergate Capital raise concerns for their tech and cryptocurrency clients.
Exchange Traded Funds
Among the ETFs, the Innovator IBD 50 ETF (fifty) decreased by 3.1%. iShares Expanded Technology and Software ETF (IGV) fell 2.3%, as ORCL stock was a large component of IGV. VanEck Vectors Semiconductor Corporation (SMH) gave up 1.9%.
SPDR S&P Metals & Mining ETFs (XME(decreased 2.6% and the Global Infrastructure Development Fund (ETF) in the USA)cradle) 2.2%. US Global Gates Foundation ETF (Planes) fell 3.1%. SPDR S&P Homebuilders ETF (XHB) declined 1.6%. Energy Defined Fund SPDR ETF (xle(down 1.4% and the SPDR Health Care Sector Selection Fund)XLV) 1%.
SPDR Financial Selection Fund (XLF) down 4.1%, with shares of JPM, Wells Fargo, Charles Schwab and Bank of America all notable holdings. SPDR S&P Regional Banking ETF (KRE) fell 8.2% to the lowest level in three years. SIVB shares is one of KRE’s prominent holding companies, along with KeyCorp and Western Alliance.
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Market rally analysis
The stock market rally had a very negative day, with a downward trend reversal that hurt major indices and blue-chip stocks.
The S&P 500 opened higher above the 50-day line, but quickly hit resistance at the 21-day moving average and reversed lower below the 200-day line and the March 2 low.
The NASDAQ initially rose above the 21-day line, but then reversed below the 200-day line. The technical-heavy compound fell briefly for 50 days before settling just above that level.
The Dow Jones broke below the 200-day line to its lowest level in four months.
The Russell 2000 fell decisively below the 50-day line, all the way to the 200-day line.
Some leaders held out, but most did not.
The banking concerns sparked by SIVB, Silvergate and KeyCorp stocks don’t mean a financial crisis is on the way. Banks, especially corporate giants like JPMorgan and Bank of America, are much better capitalized than they were in the 2007-2009 financial crisis. But the fact that the phrase “financial crisis” is even mentioned is quite a turn on.
If banks rein in lending aggressively, it will quickly affect the broader economy. It would also raise the already huge risk that the Federal Reserve will override interest rate increases, leading to a hard landing.
Friday’s jobs report will be important, but what matters is the market’s reaction. Keep in mind that if the economy suddenly stalls, the late employment data will not provide a warning.
What are you doing now
With the S&P 500 and other major indices heading south again, this is not the time to add exposure. Investors should look to cut losses on recent struggling purchases.
Perhaps the market rally will again find support through the upcoming jobs report or inflation data, but hope is not a strategy. Major indices are about to collapse decisively.
On the upside, wait for the S&P 500 and Nasdaq to retrace the 21-day lines. If this happens, new buying opportunities will arise. So keep working on those watchlists.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
Please follow Ed Carson on Twitter at @tweet For stock market updates and more.
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