NEW YORK: Wall Street stocks finished solidly higher on Thursday (March 16) after a consortium of major US private banks announced a US$30 billion (RM135 billion) rescue package for embattled lender First Republic.
After opening lower, stocks rallied on reports anticipating the package. All three major US indices finished firmly higher.
The Dow Jones Industrial Average rose 371.98 points, or 1.17%, to 32,246.55, the S&P 500 gained 68.35 points, or 1.76%, to 3,960.28 and the Nasdaq Composite added 283.23 points, or 2.48%, to 11,717.28.
The technology sector also contributed to the gains, helping to boost the Nasdaq Composite to its strongest performance since Feb 2, 2022.
There have been fears surrounding First Republic in the wake of Silicon Valley Bank's rapid collapse last week. Both lenders had a heavy share of uninsured deposits that were vulnerable to a run by depositors.
The package announced on Thursday by JPMorgan Chase, Morgan Stanley and nine other giants consisted of US$30 billion in uninsured deposits. The aim was to show their confidence in First Republic and in the country's banking system, the group said in a news release.
“Banks are looking out for one another,” said Huntington Private Bank chief investment officer, John Augustine. “We had two outliers go down and now they want to save what is considered a more mainstream bank.”
After dropping more than 30% earlier in the day, First Republic finished up 10%.
Large banks that composed the consortium also advanced, with Wells Fargo, Bank of America and JPMorgan all up more than 1%.
The positive sentiment spread to other regional lenders, with Alliance Bancorp and PacWest Bancorp advancing 14.09% and 0.7%, respectively, following a negative start.
“The market will be able to allow itself to think the worst of it is over” as far as the stock market effects go, said Briefing.com analyst Patrick O’Hare.
He added that “the market has appreciated that it was a private sector solution”.
But he also noted that economic growth prospects “have just gotten more challenging”.
The gains by stocks came as Treasury yields pushed upward, a sign that demand for safe assets had fallen. – AFP, Reuters
