NEW YORK: US stocks ended higher on Tuesday (March 21) as regional banking stocks picked up, with the embattled First Republic Bank recouping some of its losses from earlier this week.
The Dow Jones Industrial Average rose 316.02 points, or 0.98%, to 32,560.6, the S&P 500 gained 51.3 points, or 1.30%, to 4,002.87 and the Nasdaq Composite added 184.57 points, or 1.58%, to 11,860.11.
“We haven’t heard of any new bank this week” getting into trouble,” said Steve Sosnick, chief strategist at Interactive Brokers, in an interview with AFP. “That’s good news for markets.”
The sharp decline of the VIX index, which charts market volatility, suggests markets have calmed a little, he added.
Alongside First Republic's daily gains of almost 30%, Seacoast Banking Corporation of Florida also built on earlier gains to finish the day up 4.6%.
Another regional bank, KeyCorp, ended the day up 9.3%.
Both the SPXBK and the KBW Regional Banking index jumped 3.6% and 4.8%, respectively, their biggest one-day percentage jumps since late last year.
“The stock market is coming to a recognition that the banking crisis wasn’t a crisis after all, and was isolated to a handful of banks,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “Both the public and the private sector have shown they are more than able to backstop and shore up weak institutions.”
Treasury Secretary Janet Yellen, in prepared remarks before the American Bankers Association, said the US banking system has stabilized due to decisive actions from regulators, but warned more action might be required.
Attention now shifts to the Fed, which has gathered for its two-day monetary policy meeting, at which the members of the Federal Open Markets Committee will revisit their economic projections and, in all likelihood, implement another increase to the Fed funds target rate in their ongoing battle against inflation.
“The Fed will raise interest rates by 25 basis points and the market won’t care,” Pursche said. “It will all be about (chairman Jerome) Powell’s statement on the economy and inflation, and if he can do a good enough job convincing the public that the banking noise” can be attributed to bad management on the part of a few banks.
At last glance, financial markets have now priced in an 83.4% likelihood of a 25 basis-point rate hike, and a 16.6% probability that the central bank will leave its policy rate unchanged, according to CME's FedWatch tool. – AFP, Reuters
