Dow Jones Futures Fall 500 Points As Credit Suisse Triggers European Bank Sell-Off

Dow Jones futures sold off early Wednesday, along with S&P 500 futures and Nasdaq futures, with Credit Suisse (CS) tumbling as its top shareholder ruled out investing more in the ailing Swiss bank.

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The stock market jumped Tuesday, with the major indexes up strongly despite wilting for most of the afternoon. February’s CPI inflation rate cooled in line with expectations, but the report took second billing to banks.

A 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.

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.

Credit Suisse Leads European Bank Sell-Off

Credit Suisse stock fell 20% in premarket trading as Saudi National Bank, its top shareholder, ruled out any further investments. The Swiss banking giant has plunged in recent months, disclosing poor internal controls earlier this week. Credit default swaps indicate rising risks for Credit Suisse. Deutsche Bank (DB) and other European financials were notably losers early Wednesday. Trading in several European banks were halted.

The sell-off hit big U.S. banks in premarket trade, such as JPMorgan Chase (JPM) and Wells Fargo (WFC), which rose Tuesday.

Among regional banks First Republic Bank (FRC) rose while Western Alliance Bancorp (WAL) was little changed early Wednesday. PacWest Bancorp (PACW) fell. All three staged big rebounds Tuesday despite closing well off highs. Charles Schwab (SCHW) also retreated following Tuesday’s bounce.

The Financial Select SPDR ETF (XLF) retreated early Wednesday, with JPMorgan, Wells and SCHW stock big holdings. The SPDR S&P Regional Banking ETF (KRE) declined after Tuesday’s bounce. FRC and WAL are among the many holdings.

Lennar Earnings

Lennar (LEN) late Tuesday easily beat fiscal first-quarter estimates while the homebuilder guided up on Q2 orders.

LEN stock climbed 1% 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.

Dow Jones Futures Today

Dow Jones futures tumbled 1.7% vs. fair value in volatile trade. S&P 500 futures retreated 1.7% and Nasdaq 100 futures declined 1.35%.

The 10-year Treasury yield fell 11 basis points to 3.51%. The 2-year yield plunged 23 basis points to 3.99%.

Markets are leaning toward a quarter-point Fed rate hike on March 22, but see a pause in May and rate cuts over the summer.

Even with U.S. yields falling, the dollar rose.

Crude oil futures fell more than 1%. Copper futures sank over 2%.

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.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live

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%.

ETFs

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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Tesla Stock

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 Stock

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. 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 the 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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