Dow Jones futures and S&P 500 futures fell modestly Thursday morning, while Nasdaq futures edged lower. PacWest Bancorp plummeted on a report that it's mulling putting itself up for sale. The California-based bank and Western Alliance Bancorp responded with updates on deposits overnight.
HubSpot and Shopify led a slew of top stocks reporting earnings before Thursday's market open. Apple looms tonight.
The Federal Reserve hiked rates Wednesday afternoon, with the central bank and Fed chief Jerome Powell hinting at a pause. But they didn't rule out further tightening, and Powell continued to push back at market calls for Fed rate cuts later this year.
The stock market rally reversed lower near the end of Powell's comments.
Then PACW stock dived on the sales report, sending Western Alliance Bancorp plunging as well, with superregionals PNC Financial Services and Comerica also hitting fresh lows overnight.
Meanwhile, HubSpot, MercadoLibre and Axcelis Technologies reported Wednesday night. All three stocks rose overnight on strong results after closing near buy points.
Shopify surged on earnings in premarket trade. Cardinal Health, Regeneron Pharmaceuticals, Planet Fitness, Lantheus, Quanta Services Hyatt Hotels, Royal Caribbean, Installed Building Products and TopBuild also reported early Thursday.
SHOP stock, Cardinal Health and Planet Fitness closed Wednesday near buy points, while LNTH stock is close to testing its 10-week line after a big run. Hyatt, TopBuild, Installed Building Products, Quanta Services and Regeneron are all in buy zones, with RCL stock flashing an early entry.
Apple reports Thursday evening. Apple stock is trading near an eight-month high, but were down over 1% early Thursday.
MELI stock is on IBD Leaderboard, with HUBS stock on the Leaderboard watchlist. MercadoLibre, Hyatt, Lantheus, Quanta Services and Royal Caribbean are on the IBD 50. HUBS stock is on the IBD Big Cap 20.
PACW Stock, Banks Dive On Report
Wednesday evening, Bloomberg reported PacWest was mulling strategic options, including putting itself up for sale, a breakup or a capital raise.
Early Thursday, PacWest issued an update in response. The California lender said management and the board "continuously review strategic options." PacWest said it "has been approached by several potential partners and investors — discussions are ongoing."
PacWest also said it has "not experienced out-of-the-ordinary deposit flows following the sale of First Republic Bank." It said core customer deposits have risen since March 31. Total deposits are at $28 billion, with insured deposits 75% of the total vs. 73% on April 24 and 71% on March 31. However, deposits have fallen by about $900 million since April 24. Last week, PacWest said deposits were $28.2 billion as of March 31, then increased by roughly $700 million as of April 24.
Western Alliance, in its own update, also it hasn't seen "unusual deposit flows following the sale of First Republic Bank." It said total deposits were $48.8 billion as of Tuesday, up from $48.2 billion on Monday and $47.6 billion as of March 31.
PacWest Bancorp, which dived more than 50% Wednesday night, was still off 40% in premarket trade. Western Alliance dived more than 15%. Superregionals PNC stock, Regions Financial, Truist and KeyCorp suffered significant losses early Thursday.
Meanwhile, Toronto-Dominion Bank called off its planned $13.4 billion merger deal with Tennessee-based First Horizon, citing ongoing regulatory concerns. Clearly, the merger faced a shifting bank environment as well. FHN stock dived 43%. TD stock rose modestly.
The SPDR S&P Regional Banking ETF sank 4%.
All of that followed modest-to-solid losses Wednesday after PACW and WAL stock led a big sell-off Tuesday.
Dow Jones Futures Today
Dow Jones futures fell 0.3% vs. fair value after trading up and down overnight. S&P 500 futures declined 0.4%. Nasdaq 100 futures fell 0.1%. The Nasdaq 100 includes the 100 largest non-financial Nasdaq components.
The 10-year Treasury yield sank 5 basis points to 3.35%.
The European Central Bank raised interest rates by 25 basis points, as expected.
Remember that overnight action in Dow futures and elsewhere doesn't necessarily translate into actual trading in the next regular stock market session.
Fed Rate-Hike Pause
As expected, the Federal Reserve raised rates by a quarter point to 5%-5.25%. The Fed meeting policy statement used language that hinted at a rate-hike pause but left the door open to further increases if needed. Policymakers noted that "inflation remains elevated." While stating that "the U.S. banking system is sound and resilient," policymakers acknowledged that "tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation."
Fed chief Jerome Powell said labor markets remain tight and that inflation is high. But he added that it will take time for the full impact of cumulative Fed rate hikes to take effect. Powell said it was "notable" that the Fed policy statement no longer says rate hikes may be needed. He also said Fed staff forecasts for the May meeting are "broadly similar" to their March forecast of a mild recession later this year.
All told, Powell and the central bank signaled that a rate-hike pause is likely without shutting the door on further tightening. Powell once again said he doesn't expect Fed rate cuts later this year, even as markets continue to see easing starting in September.
Key Earnings
HUBS stock popped in premarket trade after HubSpot reported strong earnings and guided higher. The digital marketing software maker edged up 0.8% to 417.99 in Wednesday's session, just below a 418.49 flat-base buy point just above a cup-with-handle base. HUBS stock has been finding support at the 10-week line and had been working on yet another flat base.
MELI stock rose modestly after hours. MercadoLibre earnings comfortably beat forecasts. Shares of the Latin American digital-payments giant rose 1.9% to 1,279.99 on Wednesday. MELI stock, which has been consolidating for the past few months, could be actionable off the 10-week line.
ACLS stock climbed modestly in extended trade. Axcelis earnings topped consensus, but the chip equipment maker gave mixed signals. Shares edged up 0.7% to 122.61 on Wednesday. After surging 175% over six months to the March 21 peak of 136.38, Axcelis stock has pulled back, but shares have been finding their footing in recent days. ACLS stock is on track to have a base after this week with a 136.48 buy point, but a decisive move above the 50-day line would offer an early entry.
SHOP stock surged more than 15% in premarket trade, signaling a powerful breakout. Shopify earnings topped views and the e-commerce software giant said it'll sell most of its logistics business. SHOP stock fell 1.1% to 46.27 on Wednesday, but is working on a 49.96 cup-with-handle buy point.
PWR stock was quiet after the heavy construction firm exceeded forecasts. Quanta Services stock has been trading around a 168.85 buy point, closing just below that level Wednesday.
CAH stock climbed modestly after Cardinal Health comfortably beat Q1 views. Shares of the drug distributor closed at 81.64, pennies below the 81.67 buy point.
LNTH stock leapt after Lantheus earnings and sales topped. On Wednesday, Lantheus stock came within pennies of its 10-week line, representing a first pullback to that line since an early March breakout.
REGN stock fell modestly early Thursday after Regeneron earnings and revenue modestly topped Q1 consensus but Eylea drug sales missed. Regeneron stock had edged back above an 800.58 buy point on Wednesday.
RCL stock jumped after the cruise line giant reported a smaller-than-expected Q1 loss and slightly topped revenue views. Royal Caribbean stock is working on a 76.40 buy point. But shares were already flashing an aggressive entry from clearing the 50-day line and could test a trendline entry Thursday.
Hyatt stock was not yet trading after Q1 earnings fell short. Shares had closed just above a 118.02 cup-with-handle buy point.
PLNT stock was quiet after Planet Fitness missed Q1 views but backed full-year guidance. Planet Fitness on Wednesday fell 1.3% to 81.55. Shares are working on a 86.01 cup-base buy point, but could be working on a handle.
IBP stock was quiet after Installed Building Products earnings topped but revenue fell short. The installation installer had closed just above a 121.70 cup-base buy point.
BLD stock was not yet trading as TopBuild earnings toped while revenue was in line. The installation installer closed Wednesday in range of a 216.34 flat-base buy point.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live
Stock Market Rally
The stock market rally turned negative after Fed chief Jerome Powell said he wasn't expecting rate cuts later this year.
The Dow Jones Industrial Average sank 0.8% in Wednesday's stock market trading. The S&P 500 index declined 0.7%. The Nasdaq composite retreated 0.5%. The small-cap Russell 2000 rose 0.4% but closed near session lows.
U.S. crude oil prices slumped 4.3% to $68.60 a barrel after tumbling 5.3% on Tuesday. That's the lowest close in over six weeks. Gasoline futures sank 4.7% to the weakest in two months.
The 10-year Treasury yield fell 4 basis points to 3.4%. The three-month Treasury yield, closely tied to Fed policy, rose 3 basis points to 5.26%. The sharp yield curve inversion from the three-month to the 10-year is a notable recession signal.
ETFs
Among growth ETFs, the Innovator IBD 50 ETF edged up 0.4%. The iShares Expanded Tech-Software Sector ETF fell 1%. The VanEck Vectors Semiconductor ETF sank 1%.
Reflecting stocks with more speculative stories, the ARK Innovation ETF dipped 0.4% and ARK Genomics bounced 2%.
The SPDR S&P Metals & Mining ETF retreated 1%. U.S. Global Jets edged up 0.3%. SPDR S&P Homebuilders climbed 0.6%. The Energy Select SPDR ETF slumped 1.9%, and the Health Care Select Sector SPDR Fund dipped 0.1%.
The Financial Select SPDR ETF, which includes giants such as JPMorgan, fell 1.1% to the lowest since April 10. The SPDR S&P Regional Banking ETF slumped 1.8% to a fresh 30-month low. PACW stock and WAL stock are among the many KRE components, along with CMA stock, PNC, Regions Financial, Truist and KeyCorp.
Five Best Chinese Stocks To Watch Now
Market Rally Analysis
The stock market rally once again hit resistance near 2023 highs. All the major indexes fell below their 21-day moving averages Wednesday after finding support at those levels Tuesday.
Winners led slightly on the Nasdaq and lagged losers slightly on the NYSE. That follows terrible breadth Tuesday.
The First Trust Nasdaq 100 Equal Weighted Index ETF dipped 0.35%, reversing lower after briefly retaking the 50-day line and hitting resistance at the 21-day. The Invesco S&P 500 Equal Weight ETF sank 0.6%, further below the 200-day after briefly reclaiming the 50-day line.
The housing sector looks strong, with homebuilders, building materials makers and installers such as TopBuild all showing strength.
Many restaurants are acting well, but by no means all.
The medical sector shows a lot of strength, notably drug and biotech giants as well as medical products and systems makers. Those include Regeneron and Lantheus.
But tech growth stocks are tricky. Chips are struggling outside of Nvidia.
In short, the market rally remains "under pressure." The major indexes are not far from 2023 highs but are clearly struggling at those levels. Meanwhile, breadth is poor and market leadership is narrow.
Remember, the market can often have a second-day reaction to Fed meetings. That may be especially true now, with Fed chief Powell trying to strike a delicate balance on the rate-hike outlook. Then on Friday, the April jobs report will be a market mover.
Banking woes also could keep the Fed on hold.
Time The Market With IBD's ETF Market Strategy
What To Do Now
The market rally still isn't giving many reasons to add exposure. The major indexes are still hitting resistance while not many stocks are flashing buy signals. Market, sector and stock reversals are still common.
A lot of stocks are in or around buy zones, but market conditions — and upcoming earnings — are reasons to be cautious. But be prepared. If the market rally gains momentum, many stocks will be flashing buy signals. So you'll want to be ready to gradually step back into the market. On the flip side, investors need to have their exit strategies if conditions deteriorate.
Read The Big Picture every day to stay in sync with the market direction and leading stocks and sectors.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
