Dow Futures Rise Despite Banking Crisis and Earnings Woes

Banks Falter, Schwab Plummets, Tesla Hires, and GitLab Falls on Earnings

Dow Jones futures were higher ahead of Tuesday’s open, as the banking crisis continues to escalate, with two large bank failures in recent days — SVB Financial (SIVB) and Signature Bank (SBNY). Meanwhile, Schwab stock plunged 11% Monday on growing liquidity fears, while Tesla shares climbed after the company ramped up hiring at its Gigafactory in Texas. And GitLab crumbled 36% late on earnings.

The SPDR S&P Regional Banking ETF (KRE) dived more than 12% Monday, even after cutting some losses. That’s on top of the 16% loss it had last week.

Regional bank First Republic (FRC) crashed nearly 62%. KeyCorp (KEY) dived 27.3%. And Western Alliance (WAL) crumbled 47%.

Charles Schwab (SCHW) plunged on fears that the largest U.S. brokerage will need to sell some of its bond holdings to cover deposit withdrawals. Schwab stock’s drop at its worst point on the day would be the largest percentage decrease on record (based on data that goes back to Sept. 23, 1987), according to Dow Jones.

Major U.S. banks weren’t spared from the selling either, with Bank of America (BAC), JPMorgan Chase (JPM) and Wells Fargo (WFC) falling 5.8%, 1.8% and 7.1%, respectively.

On the economic front, eyes will be on the consumer price index on Tuesday. The CPI is expected to rise 0.4%, both overall and excluding food and energy. That would bring the headline CPI inflation rate down to 6% from 6.1% in January, with the core inflation rate easing to 5.5% from 5.6%.

Wall Street suddenly sees a solid chance that the Federal Reserve will pause its rate-hiking campaign at next week’s meeting as the failure of three banks stokes concern about broader financial-sector stress.

Half-point moves are now off the table — just a week after Fed chair Jerome Powell signaled that policymakers were ready to reaccelerate rate hikes at next week’s meeting from February’s quarter-point pace.

Now a sharp dive in Treasury yields is signaling sudden doubts about the strength of the economy. Even if the Fed doesn’t pause next week, markets are betting that rate cuts are around the corner.

On the earnings front, GitLab (GTLB) toppled 36% in extended trade after the company’s weaker-than-expected revenue guidance.

Earnings continue trickling out at the tail end of the season this week. Among them are Academy Sports & Outdoors (ASO), Adobe (ADBE), Dollar General (DG), FedEx (FDX), Five Below (FIVE) and Lennar (LEN).

On Monday, the Dow Jones Industrial Average fell 0.3%, and the S&P 500 lost 0.15%. The tech-heavy Nasdaq composite climbed 0.45% in a day of volatile trading.

Electric-vehicle giant Tesla (TSLA) traded up 0.6% Monday. Among Dow Jones stocks, Apple (AAPL) rose 1.3% and Microsoft (MSFT) climbed 2.1% in today’s stock market action.

Social media giant Meta Platforms (META), IBD Leaderboard watchlist stock Palo Alto Networks (PANW) and New Relic (NEWR) — as well as Dow Jones stocks Nike (NKE) and Salesforce (CRM) — are among the top stocks to watch in the new stock market correction.

Palo Alto is an IBD Leaderboard watchlist stock. New Relic was recently an IBD Stock Of The Day. And Nike was featured in this week’s Stocks Near A Buy Zone column.

Ahead of Tuesday’s opening bell, Dow Jones futures rose 0.3%, and S&P 500 futures moved up 0.2%. Nasdaq 100 futures were up 0.2% vs. fair value. Remember that overnight action in Dow Jones futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

The 10-year U.S. Treasury yield dived to 3.51% Monday, as safe haven trade drove bonds sharply higher following the SVB collapse. Oil prices sold off Monday after Friday’s brief bounce. West Texas Intermediate futures slid nearly 3%, trading below $75 a barrel.

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Now is an important time to read IBD’s The Big Picture column with the stock market trend back in a “market in correction” after sharp losses in recent sessions.

Friday’s Big Picture column commented, “IBD changed its market outlook to ‘uptrend under pressure’ Thursday. And after Friday’s sell-off we’ve cut our outlook further, to ‘market in correction.’ This requires investors to avoid any stock purchases and pivot to defensive trading, such as taking profits and cutting losses short.”

Since bottoming on Oct. 3, Nike shares have rallied as much as 59% to their recent high at 131.31. Now the stock is consolidating within a flat base that offers a 131.41 buy point, according to IBD MarketSmith pattern recognition.

Amid recent weakness, the stock is below its 50-day moving average, a key benchmark. A decisive retake would be bullish for the base-building prospects, carving the right side of the pattern. The relative strength line is also holding up well during the rapidly-developing stock market correction.

In recent weeks, Dow Jones leader Salesforce showed big upside strength after strong fourth-quarter results. But those gains have mostly disappeared amid the recent market weakness, and now the stock is back below a 178.94 cup-with-handle entry. Still, the stock’s recent strength is a reason to monitor the software leader in the coming sessions.

Facebook-parent Meta Platforms is quietly building a flat base with a 197.26 buy point following an earnings-fueled price surge in February. Shares are about 8% away from the latest buy point, as they rose 0.8% Monday.

Back story: Like social media rivals, Meta is struggling due to a sharp reduction in advertising revenue as clients squirm over macroeconomic concerns, recession fears and higher interest rates. This is happening as it spends billions on a risky bet to build the “metaverse,” a virtual reality world that has yet to take hold.

Credit: https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-banking-crisis-escalates-ahead-of-cpi-inflation-report-gitlab-tesla-schwab-in-focus/

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