Wall Street closes higher as First Republic helps lift banks

I was hoping that yesterday’s afternoon rally, though still closing in the red, would continue today and that it did, with the Dow opening some 300 down, almost exactly where it left off, and then steadily rising 700 points throughout the session to close 371 in the black, as was the trend with the other indexes.  Investors can thank JP Morgan and Morgan Stanley for bailing out First Republic and Swiss National for doing the same for Credit Suisse.  This alleviated many of the concerns around cascading failures.  

It is very positive that, as today’s expert put it, “Banks are looking out for one another,” though it does also suggest that the two outliers were practicing risky management (i.e. crypto) as “they want to save what is considered a more mainstream bank.” There are still uncertainties over rate hikes.  On the one hand, the labor market continues strong which supports the case for more and higher hikes, whereas declining retail sales and downward producer prices bolsters the bets for small hikes.  The smart money is still betting on a ¼ point hike this month.  The feverish volume of recent days is settling down a bit but still considerably above average at about 14.1 billion. 

Thu  March 16, 2023  4:28 PM

Wall Street closes higher as First Republic helps lift banks

By David Carnevali

DJ: 31,874.57  -280.83        NAS: 11,434.05  +5.90         S&P: 3,891.93  -27.36      3/15

DJ: 32,246.55  +371.98       NAS: 11,717.28  +283.23     S&P: 3,960.28  +68.35     3/16

NEW YORK, March 16 (Reuters) - A strong rebound by financials helped Wall Street's main indexes close firmly positive on Thursday, after some of the country's largest lenders came to the rescue of embattled First Republic Bank.  The technology sector (.SPLRCT) also contributed to the gains, helping to boost the Nasdaq Composite to its strongest performance since Feb. 2, 2022.  The latest twist in the U.S. regional banks saga came on the heels of a 50 basis point rate hike by the European Central Bank, which earlier in the day had dampened investor sentiment already hurt by fears of a banking crisis.  Financial institutions, including JP Morgan Chase & Co (JPM.N) and Morgan Stanley (MS.N), confirmed earlier reports they would deposit up to $30 billion into First Republic Bank's coffers to stabilize the lender.

"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."  Shares of JP Morgan and Morgan Stanley were up 1.94% and 1.89% respectively, while the lifeline buoyed First Republic Bank (FRC.N), which gained 9.98%.  The positive sentiment spread to other regional lenders, with Alliance Bancorp (WAL.N) and PacWest Bancorp (PACW.O) advancing 14.09% and 0.7%, respectively, following a negative start.  The KBW regional banking index (.KRX) gained 3.26%, while the S&P 500 banking index (.SPXBK) advanced 2.16%, as both sub-indexes reversed losses.

Concerns about banks have rattled the stock market in recent days after the collapse of SVB Financial fueled contagion fears.  Meanwhile, U.S. Treasury Secretary Janet Yellen said the U.S. banking system remains sound and Americans can feel confident that their deposits will be there when needed.  U.S.-listed shares of Credit Suisse advanced after the bank secured a credit line of up to $54 billion from the Swiss National Bank to shore up liquidity and investor confidence.

The Dow Jones Industrial Average (.DJI) rose 371.98 points, or 1.17%, to 32,246.55, the S&P 500 (.SPX) gained 68.35 points, or 1.76%, to 3,960.28 and the Nasdaq Composite (.IXIC) added 283.23 points, or 2.48%, to 11,717.28.

Data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to continued labor market strength, which could persuade the Fed to keep raising rates further.  Weak retail sales figures, as well as data showing a downward trend in producer inflation, on Wednesday had bolstered bets of a small rate hike by the Federal Reserve at its meet concluding on March 22.  Money markets are still largely pricing in a 25-basis-point rate hike by the Fed at its March 22 policy announcement.

Facebook parent Meta Platforms (META.O) and Snapchat operator Snap Inc (SNAP.N) climbed 3.63% and 7.25%, after the U.S. administration threatened to impose a ban on rival TikTok.

Advancing issues outnumbered declining ones on the NYSE by a 2.80-to-1 ratio; on Nasdaq, a 1.95-to-1 ratio favored advancers.  The S&P 500 posted 4 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 38 new highs and 235 new lows. 

Note: No volume data was in this report either but, per the CBOE, volume remains considerably above average at about 14.1 billion.