The stock market suffered heavy losses last week as financial SVB (SIVB) crashed and eventually collapsed. SIVB shares, along with cryptobank silvergate financial (SI), caused heavy losses for bank stocks.
West Coast Finance, like Bank of the First Republic (CRF) and Western Alliance Bank (WAL) were especially affected, but signature bank (SBNY) and charles schwab (SCHW) were also big losers. JPMorgan Chase (JPM) found support on Friday.
The major indices sold off, breaking multiple support areas during the week, as many leading stocks also came under pressure. Treasury yields plunged, with the pace of the Fed’s rate hikes ever changing.
Dow Jones futures will open on Sunday night, along with S&P 500 futures and Nasdaq futures.
In a weak, volatile and uncertain market, investors should not trade new positions and should be mostly or entirely in cash. But keep an eye out for stocks that are holding close to buy points. Palo Alto Networks (PANW), father of Facebook metaplatforms (GOAL), ultimate beauty (ULTRA), monolithic power systems (MPWR) and united airlines (UAL) are five stocks showing strength, near buy points. PANW shares have formed a handle in a long consolidation, while META shares have a new flat bottom. ULTA shares are finding support at key levels. Monolithic Power is working on a long-handled mug base, while UAL stock has pulled back from a buy zone.
Meanwhile, Apple (AAPL) also has a new flat base. tesla (TSLA) sold a lot last week but found support at its 10-week line on Friday. But TSLA’s actions are far from actionable.
But keep an eye on financials, such as FRC, WAL, SBNY and SCHW stocks, as well as the XLF Financial ETF and the KRE Regional Bank ETF. But also pay attention to giants like JPMorgan. JPM shares fell sharply last week but rebounded on Friday.
Insulating (PODD) will replace SIVB shares in the S&P 500 before the open on Wednesday. PODD shares rose on Friday night.
PANW stocks are on the watch list of the IBD leaderboard. MPWR shares are on the IBD’s long-term leader watch list. Shares of Monolithic Power, United Airlines and ULTA 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 looking at stocks from JPMorgan Chase, Palo Alto Networks, and META.
FDIC SVB Big Weekend
The Federal Deposit Insurance Corporation and state regulators shut down SVB and Silicon Valley Bank on Friday. Now the FDIC has the weekend to find out what’s next. Will there be a quick buyer for SVB? Presumably, insured depositors will regain access to their funds on Monday. But what about uninsured deposits?
About 87.5% of Silicon Valley Bank’s $126 billion in deposits as of December 31 exceeded FDIC insurance limits. Friday afternoon, Roku (ROKU) revealed that $487 million, or 26% of its cash, is held with SVB, and those deposits are “largely uninsured.” ROKU shares fell after hours.
Hundreds of companies, including many technology and venture capital startups, have deposits or business ties with Silicon Valley Bank.
Dow Jones Futures Today
Dow Jones futures open at 6 p.m. ET on Sunday, along with futures for the S&P 500 and Nasdaq 100.
Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading at the next regular stock market session.
Join IBD experts as they discuss major stocks and market conditions on IBD Live
weekly stock market action
The stock market started higher but quickly reversed lower on major losses on Fed rate hike fears and later the closures of SVB Financial and Silvergate.
Twice on Friday, stocks rebounded as Treasury Secretary Janet Yellen expressed confidence in a “resilient” banking system. But the positive momentum quickly faded.
The Dow Jones industrial average fell 4.4% in trading last week. The S&P 500 Index sold off 4.55%. The Nasdaq Composite slid 4.7%. The small-cap Russell 2000 plunged 8%.
Apple shares fell just 1.7% for the week to 148.50, holding above its 200-day line. But that is after reversing Monday’s intraday high of 156.30, almost reaching AAPL’s 157.48 buy point.
The 10-year Treasury yield plunged 29 basis points to 3.69% last week, after hitting a 2023 high of 4.09% on March 2. The 2-year yield fell 27 basis points to 4.59%, including 31 basis points on Friday and 48 basis points from Thursday to Friday.
US crude oil futures fell 3.8% to $76.68 a barrel last week but rose 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) plunged 3.4%. The iShares Expanded Technology Software (IGV) Sector ETF fell 5.7%. The VanEck Vectors Semiconductor (SMH) ETF fell 3%, with MPWR shares serving as SMH’s share.
Reflecting more speculative historical stocks, the ARK Innovation ETF (ARKK) sank 10.9% last week and the ARK Genomics ETF (ARKG) 11.4%. Tesla stock is a major holding in Ark Invest ETFs. TSLA fell 12.3% for the week, amid further price cuts and security probes. But shares rose on Friday.
SPDR S&P Metals & Mining ETF (XME) sold 11.1% last week. The US Global X Infrastructure Development ETF (PAVE) fell 7.1%. The US Global Jets ETF (JETS) fell 4.8, with UAL stocks a key component. SPDR S&P Homebuilders ETF (XHB) was down 4.85%. The Energy Select SPDR ETF (XLE) was down 5.3%. The Select Healthcare Sector (XLV) SPDR Fund fell 3.85% to the lowest point since October.
The Financial Select SPDR ETF (XLF) plunged 8.5%, with large holdings in shares from JPMorgan and SCHW. The SPDR S&P Regional Banking ETF (KRE) plunged 15.7%, its worst weekly loss since the Covid crash of March 2020. SIVB and Western Alliance shares are notable components.
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Market analysis
The stock market suffered damaging losses last week, with major indices selling off hard and breaching multiple support levels. The indices tried to recover from early losses on Friday, briefly turning positive, before falling to new lows.
The S&P 500, Nasdaq Composite and Russell 2000 all fell through their 21-day lines earlier in the week and finished decisively below their 50-day and 200-day moving averages. The S&P 500 and the Russell 2000 ended Friday below the close of the January 6 tracking 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 Tuesday and Wednesday. But SVB Financial and crypto bank Silvergate Capital rocked the banks at the end of the week.
A recovery attempt on Friday morning failed when the FDIC announced the failure of SVB Financial.
If fears of bank contagion mount, 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 cause Treasury yields and the dollar to rally higher, and the chances of the Fed raising rates would also increase.
The odds of a half-point Fed rate hike rose from 30% on Monday to over 80% on testimony from Fed chief Powell, and then fell below 40% on Friday.
All of this uncertainty is adding to fears of a hard landing, either through a banking crisis or the Fed going overboard on rate hikes.
Major stocks also sold off strongly. Several names were held for much of the week, but most of them were struggling at Friday’s close.
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 subdued CPI inflation rate could give Fed chief Powell and his colleagues the excuse that they need to raise rates by just a quarter of a point.
But in the very short term, Wall Street is likely to follow the example of the banking sector. So pay attention to banks, from recent biggest losers like First Republic to broad ETFs and stalwarts like JPM stock.
JPMorgan was the second-best stock in the S&P 500 on Friday, even as shares of SBNY, First Republic and Schwab were the worst performers. That’s a sign that investors view JPMorgan as relatively safe. But if JPM shares break last week’s lows, that would be worrisome.
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What to do now
The stock market is selling off amid bad news and even greater uncertainty.
This is not a healthy environment. Investors should be largely or completely on the sidelines, waiting to see how this plays out. If conditions improve in a few days or weeks, new buying opportunities will emerge.
Build your watchlists by focusing on stocks that show strong relative strength. If they’re near potential buying 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 market direction and major stocks and sectors.
Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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