The stock market struggled to sustain anticipated selling lows on Wednesday midday. Treasury yields fell after Swiss credit (CS) fell in the latest chapter of the banking crisis.
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The S&P 500 fell more than 1.5% but still traded above Monday’s low. Its gain since the start of the year has almost disappeared, falling to less than 1%.
The Nasdaq composite, which has a modest 4% exposure to financials, pared its loss to 0.9% as sales spread to technology, healthcare and nearly all other S&P sectors, l exception of public services.
Financials once again hurt the Dow Jones Industrial Average, sending the megacap index down 1.8%. The Russell 2000 led the decline, losing 2.7%.
Volume increased on the NYSE and Nasdaq from the same time on Tuesday.
The 10-year Treasury yield fell 23 basis points to 3.41%. Investor fear as measured by the Cboe Market Volatility Index, or VIX, climbed 18% to 28.
Oil price drops below $70, sector reels
With growing fears of a global recession, the price of US crude oil fell 6.7% to settle below $66.50 a barrel by midday. Energy Select Sector SPDR (XLE) was the weakest sector ETF, down 4.6%.
Since December, the price of US crude has been in a range between $70 and $80 a barrel.
Still, the energy ETF shows a weaker stock. This week, the Energy Select sector fell below the 200-day moving average, and the chart shows a trend of lower highs and lower lows since late January.
There is no clear support level until maybe 68 where the ETF bottomed in September.
Among deteriorating oil stocks, oil service providers Tide (TDW), SLB (SLB) and Halliburton (HAL) decompose. An escape for International shipping lanes (INSW) seems to fail.
But in a research note released today, Wells Fargo expressed optimism about oil prices.
“Overall, despite the expected recession, we believe that tight supply, the re-opening of China and the effects of the bullish commodity supercycle will support higher oil prices, which will likely occur in the second half of 2023.” , said strategists John LaForge and Mason Mendez wrote in a report.
European stock market: Credit Suisse revives concerns about contagion
The banking crisis worsened overnight. The chairman of Saudi National Bank, Credit Suisse’s largest shareholder, has been reluctant to receive additional financial aid. And on Tuesday, Credit Suisse released its delayed annual report, which warned of “material weaknesses” in its financial controls.
Chairman Axel Lehmann said on Wednesday that its capital and balance sheet remained strong. The Zurich-based bank has been struggling with multiple problems for months. Its U.S.-traded shares fell 22% midday to 1.95 and have remained below $10 a share for more than a year.
European stock markets plunged. The Parisian CAC 40 slid 3% while London’s FTSE 100 fell 3.1% and Germany’s DAX lost 2.6%. Major Asian markets avoided bad news and closed higher.
Shares of regional banks remain under pressure as depositors seek perceived safer places to put their money. The SPDR S&P Regional Bank ETF (KRE) trimmed its loss to 1.2%.
Banks are largely down in the current 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 Citigroup (C) 5%.
The SPDR S&P Bank (KBE) ETF lost 2% and is down 10% for the week.
The ETF Innovator IBD 50 (FFTY), which is not exposed to financials, still lost 3.1%. Two components seemed to be in trouble.
Supplier of industrial and electronic parts Wesco International (WCC) broke below its 50-day moving average, erasing a nearly 20% gain from its buying point of 147.15. This is a sell signal.
Hyatt Hotels (H) fell 4.5% and is trading below the 50-day moving average. It gave up gains from a buy point of 108.20 and is back near a handle entry of 103.60.
Stock market today: Inflation data is cooling
Credit Suisse’s troubles overshadowed an encouraging inflation report.
The producer price index (PPI) for February fell 0.1% from the previous month and rose 4.6% on an annual basis. Both were below economists’ forecasts. Wholesale core prices, which exclude food and energy, also fell more than expected, flat on a monthly basis and up 4.4% annualized.
But to some extent, US retail sales fell 0.4% in February. Economists had forecast a 0.3% decline month over month. Non-vehicle sales fell 0.1%, against an estimate of 0.2% increase.
The latest data argues for a pause in interest rate hikes by the Fed.
“While the market is under pressure this morning with ongoing Credit Suisse issues, the specific inflation-related news should help assure the Fed that its campaign to stifle inflation is headed in the right direction,” he said. Quincy Krosby, Chief Global Strategist for LPL Financial. .
And the slowdown in retail spending “is a necessary element to bring inflation closer to the Fed’s terminal rate,” Krosby added. Together, the data should solidify the odds of a 25 basis point rate hike next week, if the Fed raises at all.
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