Stock Market Rally Whipsaw Off Highs As Moody’s Issues This Bank Warning

Dow Jones futures rose slightly after hours, along with S&P 500 futures and Nasdaq futures.


The stock market rally rebounded strongly Thursday morning, but the major indexes slashed intraday gains, while the Russell 2000 hit a fresh 2023 low as Moody’s Investor Service warned of wider bank contagion and economic fallout. Stocks rallied late in the session as Treasury Secretary Janet Yellen pledged “additional actions” for bank deposits if needed. On Wednesday, the major indexes reversed sharply lower on Yellen comments and the Federal Reserve rate hike.

Bank stocks were big losers Thursday. First Republic (FRC) skidded to a record low and PacWest Bancorp (PACW) to an all-time closing low. But superregionals such as KeyCorp (KEY) and Comerica (CMA) also sold off, with even some giants like Bank of America (BAC) hitting multiyear lows.

On the upside, Meritage Homes (MTH) and KBH stock flashed buy signals amid strong KB Home (KBH) earnings and generally strong action among builders. Microsoft (MSFT) traded back above a buy point. Yum China (YUMC) broke out. The VanEck Semiconductor ETF (SMH) cleared a buy point, offering a way to play the chip sector with NVDA stock and many hot semis extended.

MTH stock and Nvidia (NVDA) are on IBD Leaderboard. MSFT stock is on IBD Long-Term Leaders. Meritage and KBH stock are on the IBD 50, along with several other homebuilders. Meritage Homes is Thursday’s IBD Stock Of The Day.

But investors should remain cautious. Yes, a rally attempt is underway, but it’s still a market correction. The rally attempt remains divided and volatile, with the banking sector a major negative.

Moody’s: Wider Bank ‘Turmoil’ A Risk

There is a rising risk that regulators “will be unable to curtail the current turmoil without longer-lasting and potentially severe repercussions within and beyond the banking sector.” That could  trigger greater “financial and economic damage than we anticipated,” Moody’s Investor Service warned Thursday. Still, the credit-ratings agency still expects policymakers to “broadly succeed.”

Bank stocks and the…


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