NEW YORK: US stocks closed higher on Tuesday (March 14) on easing worries about banking sector upheaval and as data showed price increases cooled in February, fuelling hopes that the Federal Reserve (Fed) could moderate its response to inflation.

Regional banking stocks also bounced back, recouping some of the ground they lost following last week’s dramatic collapse of Silicon Valley Bank (SVB).

The Dow Jones Industrial Average rose 336.26 points, or 1.06%, to 32,155.40, the S&P 500 gained 64.8 points, or 1.68%, to 3,920.56 and the Nasdaq Composite added 239.31 points, or 2.14%, to 11,428.15.

Traders received some welcome news at the start of the day with the release of the consumer price index (CPI), which slowed to an annual rate of 6% last month – still well above the Fed'’s 2% target.

But core CPI, which excludes volatile food and energy prices, crept up month-on-month by 0.5%, slightly higher than analysts predicted.

Regional banking stocks rebounded after a torrid few days of trading in the wake of SVB’s collapse, with shares of First Republic Bank rising more than 25%.

Seacoast Banking Corporation of Florida ended the day more than 16% higher, while KeyCorp bank's share price finished up around 7%.

The improved mood provides much-needed respite for traders, who have faced a turbulent time since SVB’s shock collapse last week in the face of a bank run by depositors.

Attention is now likely to turn to the Fed’s interest rate decision next week, with analysts divided on whether the central bank will pause its aggressive campaign of increases in the face of stubborn inflation.

Bank contagion fears were allayed on Tuesday as US President Joe Biden and other global policymakers vowed the crisis would be contained.

“The market is having an opportunity to digest some of the news over the last couple of days,” said Matthew Keator, managing partner in the Keator Group, a wealth management firm in Lenox, Massachusetts. “(Investors) are seeing a coordinated effort with various government agencies, and with hindsight, they’re feeling as if things have contained themselves a bit.”

“Part of the stabilisation today is folks feeling as if the Fed might back off from some of the hawkish expectations that followed chairman Powell’s comments last week,” Keator added.

“If the Fed isn’t careful, they could create some unintended shocks to the system,” he said.

Among individual companies, Facebook parent Meta Platforms jumped 7.3% after announcing it will shed 10,000 jobs in the coming months and leave 5,000 other roles unfilled.

United Airlines tumbled 5.4% as it projected a loss in the first quarter due to the hit from a new collective bargaining agreement with pilots. – AFP, Reuters