The stock market struggled to hold onto early sell-off lows Wednesday afternoon. Government bond yields then fell Swiss credit (CS) stock plummeted in the latest chapter of the banking crisis.
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The S&P 500 stumbled more than 1.5%, but still traded above Monday’s low. Gains since the start of the year have all but disappeared, down to less than 1%.
The Nasdaq composite, which has a modest 4% exposure to financials, trimmed its loss to 0.9% as sales spread to technology, healthcare and just about every other S&P sector except utilities.
Financials hurt the Dow Jones Industrial Average again and the megacap index fell 1.8%. The Russell 2000 led the downtrend, losing 2.7%.
Volume on the NYSE and Nasdaq rose compared to the same time on Tuesday.
The yield on the 10-year Treasury fell 23 basis points to 3.41%. Investor anxiety, as measured by the Cboe Market Volatility Index, or VIX, rose 18% to 28.
Oil price falls below $70, sector rolls
With concerns about a global recession mounting, the price of US crude fell 6.7% to less than $66.50 a barrel at midday. Energy Select Sector SPDR (XLE) was the weakest sector ETF, down 4.6%.
Since December, the price of US crude oil has fluctuated between $70 and $80 a barrel.
Still, the energy ETF shows weaker action. Energy Select Sector dipped below the 200-day moving average this week and the chart shows a pattern of lower highs and lower lows since late January.
There is no clear support level until perhaps 68, where the ETF bottomed out in September.
Among deteriorating oil supplies, oil field service providers Tidal water (TDW), SLB (SLB) and Halliburton (HAL) are in decline. A breakthrough for International seaways (INSW) seems to fail.
But in a research note today, Wells Fargo sounded bullish on oil prices.
Overall, despite the expected recession, we believe that tight supply, China’s reopening and the effects of the commodity bull supercycle will support higher oil prices, which are likely to materialize in the second half of 2023. strategists John LaForge and Mason Mendez wrote in a report.
European stock market: Credit Suisse revives contagion concerns
The banking crisis took a turn overnight. The chairman of Saudi National Bank, Credit Suisse’s largest shareholder, declined additional financial support. And on Tuesday, Credit Suisse released its delayed annual report, warning of “material weaknesses” in financial controls.
Chairman Axel Lehmann said Wednesday that capital and balance sheet remain strong. The bank from Zurich has been struggling with several problems for months. Shares traded in the US plummeted 22% in the afternoon to 1.95 and have been below $10 per share for more than a year.
European stock markets collapsed. The Paris CAC 40 fell 3%, while the London FTSE 100 fell 3.1% and the German DAX lost 2.6%. Major Asian markets avoided the bad news and closed higher.
Regional banking stocks remain under pressure as savers look for what are considered safer places to store their money. SPDR S&P Regional Bank ETF (KRE) trimmed the loss to 1.2%.
Banks well down in today’s stock market
Among the major US banks, JPMorgan Chase (JPM) fell 4.7%. Wells Fargo (WFC) lost 4.5%, bank of America (BAC) 1.5%, Bank of New York Mellon (BK) 3.9% and Citi group (C) 5%.
SPDR S&P Bank ETF (KBE) lost 2% and is down 10% this week.
The Innovator IBD 50 ETF (FFTY), which has no exposure to financials, still lost 3.1%. Two components seemed to run into problems.
Supplier of industrial and electronic components Wesco International (WCC) was below its 50-day moving average, wiping out a gain of nearly 20% from its 147.15 buy point. That’s a sell signal.
Hyatt Hotels (H) is down 4.5% and is trading below its 50-day moving average. It has given up gains from a buy point of 108.20 and is back near an entry of 103.60.
Stock Market Today: Inflation Data Cooling
Credit Suisse’s troubles overshadowed an encouraging inflation report.
February’s producer price index (PPI) fell 0.1% from the previous month and rose 4.6% year-on-year. Both were below economists’ forecasts. Core wholesale prices, excluding food and energy, also cooled more than expected, flat month-on-month and rising 4.4% year-on-year.
But a bit of a damper was that US retail sales fell 0.4% in February. Economists had predicted a 0.3% month-on-month decline. Sales excluding vehicles fell 0.1% against estimates for a 0.2% increase.
The latest data supports the case for the Fed to stop raising interest rates.
“While the market is weighed down this morning by Credit Suisse’s ongoing problems, the specific inflation-related news should help reassure the Fed that its campaign to contain inflation is moving in the right direction,” said Quincy Krosby, chief global strategist for LPL. Finance. .
And the slowdown in retail spending “is a necessary component of bringing inflation closer to the Fed’s final interest rate,” Krosby added. Together, the data should bolster the likelihood of a 25 basis point rate hike next week, if the Fed raises at all.
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