What to do as the S&P 500 breaks final support; Look at JPMorgan, these bank stocks

The stock market suffered big losses last week as SVB Financial (SIVB) crashed and eventually collapsed. Stock SIVB, with crypto bank Silvergate Financial (SI), triggered intense losses for bank stocks.

West Coast financial companies such as Bank of the First Republic (FRC) and Western Alliance Bancorp (WAL) were particularly affected, but Signature Bank (SBNY) and Charles Schwab (SCW) were also big losers. JPMorgan Chase (JPM) found support on Friday.

Major indices sold off heavily, breaking through several support areas during the week as many top stocks also came under pressure. Treasury yields plunged as the pace of Fed rate hikes varied widely.

Dow Jones futures will open Sunday night, along with S&P 500 and Nasdaq futures.

In a weak, volatile and uncertain market, investors should not make new position transactions and should be largely or entirely in cash. But keep an eye out for stocks holding near the buy points. Palo Alto Networks (PANW), Facebook parent Metaplatforms (META), Ultimate beauty (ULTA), Monolithic power systems (MPWR) and United Airlines (UAL) are five stocks showing strength, close to the buy points. PANW stock has formed a handle on a long consolidation, while META stock has a flat new base. The ULTA stock is finding support at key levels. Monolithic Power works on a long cup base with handle as UAL stock pulled back from a buy zone.

In the meantime, Apple (AAPL) also has a new flat base. You’re here (TSLA) sold hard last week, but found support at its 10-week line on Friday. But the TSLA stock is far from exploitable.

But keep an eye out for financial stocks, such as FRC, WAL, SBNY and SCHW stocks, as well as the XLF financial ETF and the KRE regional bank ETF. But also watch out for giants like JPMorgan. JPM stock fell sharply last week, but rebounded on Friday.

Isolate (PODD) will replace SIVB stock in the S&P 500 ahead of Wednesday’s open. PODD stock surged Friday night.

Some 87.5% of Silicon Valley Bank’s $126 billion in deposits as of Dec. 31 exceeded FDIC insurance limits. Late Friday, Year (ROKU) revealed that $487 million, or 26% of its cash, is held by SVB, with those deposits “largely uninsured.” ROKU’s stock fell after hours.

PANW stock is on the IBD Leaderboard watchlist. The MPWR stock is on the IBD Long-Term Leaders watch list. Shares of Monolithic Power, United Airlines and ULTA are on the IBD 50. Meta Platforms was the IBD stock of the day on Friday.

The video embedded in this article provides an in-depth look at the market action while analyzing stocks from JPMorgan Chase, Palo Alto Networks and META.

Dow Jones Futures Today

Dow Jones futures open Sunday at 6 p.m. ET, along with S&P 500 and Nasdaq 100 futures.

Remember that overnight action on futures contracts on Dow Jones and elsewhere does not necessarily translate into actual trading in the next regular trading session.

Join IBD experts as they analyze key stocks and market conditions on IBD Live

Weekly stock market action

The stock market started higher but quickly reversed lower on steep losses on fears of Fed rate hikes and later the shutdowns 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 stock trading last week. The S&P 500 index lost 4.55%. The Nasdaq composite slipped 4.7%. Small cap Russell 2000 plunged 8%.

Apple stock fell just 1.7% for the week to 148.50, holding above its 200-day line. But that’s after reversing from Monday’s intraday high at 156.30, almost hitting the 157.48 AAPL 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 points Thursday through Friday.

U.S. crude oil futures fell 3.8% to $76.68 a barrel last week but rose on Friday.


Among growth ETFs, the Innovator IBD 50 ETF (FFTY) fell just over 6% last week, while the Innovator IBD Breakout Opportunities ETF (BOUT) fell 3.4%. The iShares Expanded Tech-Software Sector ETF (IGV) fell 5.7%. ETF VanEck Vectors Semiconductor (SMH) fell 3% as MPWR stock was held by SMH.

Reflecting more speculative stocks, ARK Innovation ETF (ARKK) plunged 10.9% last week and ARK Genomics ETF (ARKG) 11.4%. Tesla stock is a major holding in Ark Invest’s ETFs. TSLA fell 12.3% for the week, amid further price cuts and security probes. But shares rose slightly on Friday.

The SPDR S&P Metals & Mining ETF (XME) sold 11.1% last week. The Global X US Infrastructure Development ETF (PAVE) fell 7.1%. The US Global Jets ETF (JETS) fell 4.8, with UAL stock a key contributor. SPDR S&P Homebuilders ETF (XHB) resigned 4.85%. ETF Energy Select SPDR (XLE) fell 5.3%. The SPDR healthcare sector fund (XLV) fell 3.85% to its lowest level since October.

The Financial Select SPDR ETF (XLF) plunged 8.5%, with large holdings in JPMorgan and SCHW shares. The SPDR S&P Regional Banking ETF (KRE) fell 15.7%, its worst weekly loss since the Covid crash in March 2020. SIVB and Western Alliance stocks are notable components.

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Market analysis

The stock market suffered damaging losses last week, with major indices selling sharply and breaking through several support levels. The indices tried to rebound from the initial losses on Friday, briefly turning positive, before falling to new lows.

The S&P 500, the Nasdaq composite and the Russell 2000 crossed their 21-day lines early in the week and ended well below their 50- and 200-day moving averages. The S&P 500 and Russell 2000 ended Friday below the January 6 tracking day close.

The Dow Jones is at its worst level since early November.

Fed chief Jerome Powell’s signal that he favors “faster” rate hikes hit the market on Tuesday-Wednesday. But SVB Financial and crypto bank Silvergate Capital rattled banks over the weekend.

An attempted rebound on Friday morning failed when the FDIC announced the failure of SVB Financial.

If fears of banking contagion grow, it would be grim for Wall Street and the economy. However, if SVB Financial’s woes are seen as isolated and broader banking fears fade quickly, it could restore overall market confidence. But it would also likely lead to a rebound in Treasury and dollar yields, with the odds of a Fed rate hike also increasing.

The odds of a half-point Fed rate hike rose from 30% on Monday to more than 80% on testimony from Fed Chief Powell, then fell back below 40% on Friday.

All of this uncertainty is on top of fears of a hard landing, either via a banking crisis or the Fed overshooting rate hikes.

Major stocks also sold hard. A number of names held up for much of the week, but most of them were in trouble at Friday’s close.

Until Thursday, Friday’s jobs report and the upcoming CPI inflation report on March 14 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 they need to raise rates by just a quarter of a point.

But in the very short term, Wall Street will probably take inspiration from the banking sector. So watch out for banks, from recent biggest losers like First Republic to broad ETFs and relative mainstays like JPM stocks.

JPMorgan was the second best stock in the S&P 500 on Friday, even as SBNY, First Republic and Schwab stocks were the worst performers. This is a sign that investors view JPMorgan as relatively safe. But if JPM stock breaks last week’s lows, that would be worrisome.

The woes of SVB and Silvergate have also affected the technology, biotech and crypto sectors, with the banks having direct or indirect ties to many companies in these sectors, such as Roku.

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What to do now

The stock market is selling hard amid bad news and even greater uncertainty.

It’s not a healthy environment. Investors should be largely or entirely on the sidelines, waiting to see how it plays out. If conditions clear up in a few days or weeks, new buying opportunities will arise.

Build your watchlists by focusing on stocks with high relative strength. If they are close to potential buy points like META stocks, Monolithic Power or Palo Alto, great. But that’s not the priority right now.

Read The Big Picture every day to stay in tune with market direction and top stocks and sectors.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.


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