Dow futures were little changed Monday morning, along with S&P 500 futures and Nasdaq futures. c. B. Morgan Chase (JPM) will acquire the bulk of First Republic Bank, as part of a quick government expropriation and sale.
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The stock market rally fell sharply last week, but rebounded to close with solid gains, a change that could pave the way for a stronger advance.
Major indices fell on Tuesday First Republic Bank (FRC) revived banking concerns. However, the major indicators found support and rebounded. In the beginning, huge maps like Meta platforms (meta) And Microsoft (MSFT) led the comeback, but its amplitude improved late in the week.
The market rally remains “under pressure”. Investors still need to see more market strength and more buying opportunities.
Earnings season continues to be heavy this week, with advanced micro devices (AMD) late on Tuesday and apple (AAPL) Delivery date on Thursday. The Fed will be raising the interest rate again on Wednesday, along with key economic data next week. The big question is whether Fed Chair Jerome Powell is signaling that the central bank will pause interest rate hikes.
JPMorgan Purchase of the First Republic
Regulators seized First Republic and promptly sold it to JPMorgan Chase for $12 billion. JPMorgan assumes all of the California-based bank’s $92 billion in deposits, including the $30 billion that JPMorgan and other large banks pumped into the First Republic in March in an effort to avert its collapse. JPMorgan will also buy most of the assets, including about $173 billion in loans and $30 billion in securities.
The Federal Deposit Insurance Corporation will share losses in First Republic loans and give $50 billion in financing to JPMorgan. The agency estimated that its insurance fund would lose $13 billion in the deal.
JPMorgan needed a regulatory waiver to buy First Republic, because it already controls at least 10% of US deposits. PNC Finance (PNC) And Citizens Finance Group (CFG) also reportedly bid for the first republic.
The First Republic is the second largest US bank failure of all time, surpassing Silicon Valley Bank and Signature Bank. Only during the financial crisis was the collapse of Washington Mutual greater.
JPM stock rose 4% early on Monday, indicating a move above the 141.88 cup handle buy point.
FRC stock is down 34% in pre-market trading. It’s unclear if FRC’s stock is worth anything after the deal.
First Republic shares crashed 75% last week to record lows, spurred by the disclosure of a massive influx of deposits in the first quarter. Despite efforts to engineer a quasi-bailout by major banks, FDIC takeover expectations grew during the week.
Federal Reserve data Friday evening showed both bank deposits and loans rising in the latest week, indicating there is no major credit crunch yet.
Regional bank stocks fell mid-week to new lows on First Republic’s deposit trip but rallied late in the week. SPDR S&P Regional Banking ETF (KRE) fell Monday morning. PNC Financial, a prominent component of KRE, fell modestly after losing in a First Republic bidding war.
Dow jones futures today
Dow futures contracts were fixed against fair value. S&P 500 futures were down 0.1% and Nasdaq 100 futures were down 0.2%.
Crude oil futures fell 2%.
The 10-year Treasury yield rose 4 basis points, to 3.49%.
Remember that overnight action in Dow futures and elsewhere does not necessarily translate into actual trading in the next regular stock market session.
Hong Kong and many markets around the world will be closed for the Labor Day holiday on May 1, including most of Europe.
META stock is running IBD Leaderboard, with DXCM shares play dividend options. MSFT stock is at IBD Long-Term Leaders. ANET stock is located in defect 50. AMD, Arista Networks and DXCM stocks are in issue IBD Big Cap 20. Arista Networks was IBD Friday’s stock
The video embedded in the article discussed a big week in the market and analyzed AMD stock, InMode (INMD) and dexcom.
Amazon tops 5 S&P 500 stocks near buy points after earnings
Monday earnings and sales
Meanwhile, the EV-focused chipmaker on semiconductors (onQ1 views topped the pre-opening. ON stock rose strongly before the open. Shares fell 2.4% last week along with other chip makers exposed to EVs amid concerns about EV demand, but pulled back from their lows to close above the 200-day line.
China EV startups Lee Otto (L.I), New (nio) And XPeng (XPEV) April delivery reported early on Monday. Li Auto sales jumped to a new record of 25,681 hybrid SUVs, up 23% from March and 516% from a year earlier. XPeng reported sales of just over 7,000 EVs, up partially compared to March. Nio sales have fallen below 7,000 as it struggles with a paradigm shift.
The weekly data gave strong signals about monthly deliveries for all three companies.
LI stock rose slightly before the open, indicating a move above all of its moving averages. Nio and XPeng are also up.
China’s EV and battery giant BYD (BYDDF) April sales data will be released early in the week. the Tesla (TSLAThe rival company reported strong first-quarter earnings on Thursday.
Tesla isn’t blowing up China sales, but weekly data so far shows a strong start to domestic sales there. But there are reports that Tesla Shanghai closed its doors for five days around the May Day holiday there. Reportedly, Tesla has also started offering some modest discounts on some Model 3 and Y stock vehicles in Europe.
BYD stock is in a range of early entry. LI stock is trying to recover key levels. XPeng and Nio stock face significant hurdles. Tesla stock is below all of its moving averages.
also, Arista Networks (network) on tap to report first-quarter earnings Monday night. Shares of ANET, a major supplier to the Meta and Microsoft platforms, found support in its 50-day streak last week.
Join IBD experts as they analyze actionable shares in the bullish stock market on IBD Live
Stock market rise
The stock market rally looked ugly on Tuesday but bounced back for gains in the major indices.
The Dow Jones Industrial Average rose 0.9% in last week’s trading on the stock market. The S&P 500 was up 0.9%. The Nasdaq Composite rebounded 1.3%. Small cap Russell 2000 fell 1.3%
The 10-year Treasury yield fell 12 basis points for the week, to 3.45%.
US crude oil futures fell 1.1% to $76.78 a barrel last week, even with Friday’s rebound of 2.7%. Gasoline futures fell 0.9% for the week, but 9.1% in the past two weeks.
Exchange Traded Funds
Among the ETFs, the Innovator IBD 50 ETF (fifty) sank 3.6% last week, with many components taking huge losses in earnings. The Innovator IBD Breakout Opportunities ETF (fit) increased by 0.3%. iShares Expanded Technology and Software ETF (IGV) sank 1.45%, with Microsoft a large IGV component. VanEck Vectors Semiconductor Corporation (SMH) decreased by 0.4%. AMD stock is a major SMH stock that also holds ON stock in the ETF.
Reflecting more speculative stories, the ARK Innovation ETF (ARK)ark(down 4.5% last week and the ARK Genomics ETF)ARKG) 5.3%. Tesla stock is the first stock to be held via Ark Invest’s ETF, as Cathie Wood has added more TSLA shares in the past few weeks. Ark also owns a small stake in BYD stock.
SPDR S&P Metals & Mining ETFs (XME) fell 1.6% last week. Global Infrastructure Development Fund X US (cradle) ended just above breakeven point. US Global Gates Foundation ETF (Planes) was down 1%, but it came off its lows. SPDR S&P Homebuilders ETF (XHB) increased by 2.2%. Energy Defined Fund SPDR ETF (xle) partially increased. SPDR Health Care Sector Selection Fund (XLV) fell 0.6% but rebounded from its lows. DXCM stock is a component of XLV.
SPDR Financial Selection Fund (XLF) fell by 0.15%, but rebounded to close less than 50 days. SPDR S&P Regional Banking ETF (KRE) fell 0.6%, but pared losses after hitting its worst level since late 2020. FRC stock is a holding of KRE.
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Market rally analysis
The stock market rally had a solid week, with major indices testing support but eventually closing with solid gains.
The Nasdaq fell to its 50-day line on Tuesday, as First Republic spooked investors once again. The S&P 500 and Dow Jones are close to this level, reducing the 21-day lines by the middle of the week.
Even worse, the First Trust Nasdaq-100 Equal Weighted Index ETF (QQEW) and the Invesco S&P 500 Equalweight ETF (RSP) fell below the 50-day lines on Tuesday. The latter also slid below 200 as these ETFs continued to drop on Wednesday, even as Microsoft boosted the Nasdaq.
Meta shares and other tech giants fueled strong gains on Thursday. QQEW and RSP lag behind QQQ and SPY, respectively, but still work just fine. On Friday, indices rose modestly, with the RSP outperforming, as it was once again above the 50-day line.
The Nasdaq did not surpass the intraday high on April 18, but achieved its best close since September. The S&P 500 and Dow Jones topped their April peaks, with all major indexes near their 2023 highs.
The SMH chip ETF, which has fallen to its worst level since mid-March, has cut weekly losses but is still below the 50-day line. Some names, eg L Researchh (LRCX) and AMD stock, close entries are being prepared. But many of the chip plays saw bad selling, including some huge dips in earnings.
Huge profit losses among blue-chip stocks have been all too common in recent days. Market leadership remains tight. Many stocks are not flashing buy signals or are about to do so. Many of these are earnings on click, including AMD, floor and decoration (FND), InMode (INMD) and the ANET stock.
Apple stock looks stretched on the daily chart, but on the weekly chart, investors can see the top buy point of a long handle cup or double bottom bottom. The handle also appears as a three-week narrowing pattern, according to MarketSmith analysis.
After last week’s shake-up, the market’s rally may be poised for a stronger advance. If the major indices break out of their 2023 highs with any kind of widening, the market rally could have some room for big profits and the Fed meeting in the rearview mirror. However, stocks may hit resistance again in the coming days.
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What are you doing now
It was hard to get over the stock market rally.
Investors likely cut exposure in the past week as many stocks erased gains or flashed sell signals. Although the major indices closed higher, there were not many opportunities to consolidate positions. that’s ok. If the market rally really consolidates, these opportunities will come. If the indexes are thinly widened, you’ll be glad you’re mostly cash.
Add exposure gradually as conditions improve. Consider earnings reports.
While the rebound at the end of the week didn’t cause many breakouts and early entries, many stocks are starting to move into their positions. So have your watchlists ready.
Several blue chip stocks, including some big winners earlier in the year, have been flashing sell signals in the past week or so.
Read the big picture every day to stay in sync with market trend, leading stocks and sectors.
Please follow Ed Carson on Twitter at @employee For stock market updates and more.
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