Market Rally Divided: UBS, Credit Suisse In Talks; First Republic Bank Eyes

Dow Jones futures will open Sunday evening, along with S&P 500 futures and Nasdaq futures, amid a divided market rally. The Federal Reserve meeting looms but it’s already shaping up to be a big week for First Republic, Credit Suisse and the banking industry.

A stock market rally attempt is underway, but there is a clear divergence. The Nasdaq, led by Microsoft (MSFT), Meta Platforms (META), Nvidia (NVDA) and Advanced Micro Devices (AMD), surged above its 50-day and 200-day lines, even with Friday’s pullback.

Meanwhile the other indexes are being weighed down by bank and commodity stocks. The S&P 500 rose modestly, but couldn’t hold key support Friday. The Dow Jones edged lower while the Russell 2000 tumbled.

Banks remain in focus with industry giants and regulators scrambling to contain the crisis. Stocks boomed Thursday as JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), Citigroup (C) and 10 other big banks offered a lifeline to First Republic (FRC) while the Swiss National Bank supported ailing Swiss giant Credit Suisse (CS). But FRC stock and many other banks sold off again, with JPM stock hitting a fresh 2023 low.

Big Weekend For First Republic, Credit Suisse

This could be a big weekend for bank headlines. Financial regulators often use Saturday and Sunday to hammer out policies or rescues.

First Republic is look to raise cash via a private stock sale to other banks or private-equity firms, the New York Times reported late Friday. Meanwhile, Moody’s downgraded First Republic to junk, following similar moves by S&P Global and Fitch earlier in the week. FRC stock, down 33% in Friday’s trade, tumbled 15% after hours. Notably, SVB Financial’s March 8 bid to raise cash via securities sales helped trigger its final collapse. But regulators and other banks will likely be keen to avoid that.

Separately, UBS (UBS) is in talks to buy all or some of Credit Suisse, according to multiple reports, possibly with a government backstop. Deutsche Bank (DB) is interested in some Credit Suisse assets, Bloomberg reported. The long ailing Credit Suisse hit a record low on Thursday before borrowing $54 billion from the Swiss National Bank, but several European banks curbed trades with the bank on Friday.

CS stock rose 7% late Friday while UBS climbed 3.5%.

Pacific Western Bank, the subsidiary of PacWest Bancorp (PACW) said Friday night that it still has “solid liquidity” with over $10.8 billion in unavailable cash. That total exceeds uninsured deposits.

Meanwhile, the FDIC is open to sharing potential losses from SVB’s Silicon Valley Bank and Signature Bank to smooth their sale, the Financial Times reported Friday afternoon.

The Fed’s Tuesday-Wednesday policy meeting will try to balance current banking woes with fighting inflation. Fed funds futures have swung wildly over the past week, but markets currently are leaning toward a modest rate hike.

A news-driven, volatile, divided market rally attempt amid a possible banking crisis is not exactly an ideal situation. Investors should be cautious. But there’s no denying that a number of growth stocks have been flashing buy signals.

Stocks To Watch

Chip stocks remain clear market leaders. On Semiconductor (ON), Aehr Test Systems (AEHR), Mobileye (MBLY), Applied Materials (AMAT), GlobalFoundries (GFS), Monolithic Power Systems (MPWR) and STMicrolectronics (STM) are all near potential buy points or early entries. All have relative strength lines at or near highs.

Tesla (TSLA) continues to consolidate, holding support and facing resistance at several key levels.

Pinduoduo parent PDD Holdings (PDD) reports earnings Monday before the open along with Foot Locker (FL). Both PDD and FL stock are near potential early entries around their 50-day lines.

MPWR stock is on SwingTrader. Monolithic Power Systems, STMicro, Mobileye and ON stock are on the IBD 50. Monolithic Power, MBLY stock and AMAT stock are on the IBD Big Cap 20.

The video embedded in this article reviewed the weekly market action in depth and analyzed AEHR stock, PDD and Lennar (LEN).

Dow Jones Futures Today

Dow Jones futures open at 6 p.m. ET on Sunday, along with S&P 500 futures and Nasdaq 100 futures.

Remember that overnight action in Dow futures and elsewhere doesn’t necessarily translate into actual trading in the next regular stock market session.

Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live