Stock market falls on bank fears as Credit Suisse falls below $2

The stock market struggled to hold early sell-off levels by mid-Wednesday. Treasury yields fell behind Swiss credit (CS) shares fell in the last chapter of the banking crisis.

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The S&P 500 stumbled more than 1.5%, but was still trading above Monday’s low. Year-to-date gains have all but disappeared, down to less than 1%.

The Nasdaq composite, which has a modest 4% exposure to financials, pared losses to 0.9% as sales spread to technology, health care and just about every other S&P sector except utilities.

Financial results hurt the Dow Jones Industrial Average once again, sending the megacap index down 1.8%. The Russell 2000 led the decline, losing 2.7%.

Volume rose on the NYSE and Nasdaq compared to the same time on Tuesday.

The yield on the 10-year Treasury lost 23 basis points to 3.41%. Investor fear as measured by the Cboe Market Volatility Index, or VIX, rose 18% to 28.

Oil price falls below $70, sector rolls

With growing concerns about a global recession, the price of US crude fell 6.7% to 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 oil has been in a range between $70 and $80 per barrel.

Nevertheless, the energy ETF is showing weaker action. The Energy Select Sector this week fell below its 200-day moving average, and the chart is showing a pattern of lower highs and lower lows since late January.

There is no clear support level until perhaps 68, where the ETF bottomed in September.

Among the deteriorating oil stocks, oilfield service providers Tide (TDW), SLB (SLB) and Halliburton (HAL) expires. An outbreak for International Seaways (INSW) appears to be failing.

But in a research note today, Wells Fargo sounded optimistic about oil prices.

“Overall, despite the expected recession, we believe tight supply, China’s reopening and the effects of the commodity bull supercycle will support higher oil prices, most likely in the latter 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 for the worse overnight. The chairman of the Saudi National Bank, Credit Suisse’s largest shareholder, refused further financial assistance. And on Tuesday, Credit Suisse released its belated annual report, which warned of “significant weaknesses” in financial controls.

Chairman Axel Lehmann said on Wednesday that the capital and balance sheet are still strong. The Zurich-based bank has been dealing with multiple issues for months. Its US shares fell 22% at midday to 1.95, and have been below $10 a share for more than a year.

The European stock markets plunged. Paris’ CAC 40 fell 3% while London’s FTSE 100 fell 3.1% and Germany’s DAX lost 2.6%. Major Asian markets avoided the bad news and closed higher.

Regional bank stocks remain under pressure, as depositors seek supposedly safer places to put their money. The SPDR S&P Regional Bank ETF (KRE) pared losses to 1.2%.

Banks mostly lower in today’s stock market

Among the major US banks, JPMorgan Chase (JPM) fell 4.7 percent. 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 ETF (KBE) fell 2% and is down 10% for the week.

The Innovator IBD 50 ETF (FFTY), which has no exposure to financials, still lost 3.1%. Two components appeared to be in trouble.

Supplier of industrial and electronic parts Wesco International ( WCC ) dipped below its 50-day moving average, erasing a nearly 20% gain from its buy point of 147.15. It is a sell signal.

Hyatt hotels (H) fell 4.5% and is trading below its 50-day moving average. It has given up gains from a 108.20 buy point and is back near a 103.60 handle entry.

Stock market today: Inflation data cools

Credit Suisse’s woes overshadowed an encouraging inflation report.

The producer price index (PPI) for February fell 0.1% from the previous month and rose 4.6% year-on-year. Both were below economists’ forecasts. Core wholesale prices, which exclude food and energy, also cooled more than expected, flat on a monthly basis and up 4.4% annually.

But in a bit of a dampener, US retail sales fell 0.4% in February. Economists had predicted a 0.3% month-on-month decline. Sales excluding vehicles fell 0.1%, compared with estimates for a 0.2% increase.

The latest data supports the case for the Fed to stop raising interest rates.

“While the market this morning is under pressure with Credit Suisse’s ongoing problems, the specific inflation-related news should help reassure the Fed that the campaign to curb inflation is moving in the right direction,” said Quincy Krosby, global chief strategist for LPL Financial. .

And the decline in retail spending “is a necessary component to bring inflation closer to the Fed’s terminal rate,” Krosby added. Taken together, the data should bolster the odds for a 25 basis point rate hike next week, if the Fed raises at all.

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