Wall Street closes higher as First Republic helps boost banks

By David Carnivali

NEW YORK (Reuters) – A strong rebound in financial stocks helped Wall Street’s main indexes close firmly in positive territory on Thursday after some of the country’s biggest lenders came to the rescue of ailing First Republic Bank.

The technology sector also added to gains, helping the Nasdaq Composite post its strongest performance since February 2, 2022.

The latest turn in the US regional banks saga followed a 50 basis point rate hike by the European Central Bank, which earlier in the day dampened investor sentiment already weighed down by fears of a banking crisis.

Financial institutions including JP Morgan Chase & Co and Morgan Stanley confirmed earlier reports that they would pour up to $30 billion into First Republic Bank’s coffers to stabilize the lender.

“Banks look out for each other,” said John Augustine, chief investment officer at Huntington Private Bank.

“We had two breakaways that went under and now they want to bail out a bank that’s considered a mainstream bank.”

Shares in JP Morgan and Morgan Stanley rose 1.94% and 1.89%, respectively, while lifeline buoyed First Republic Bank, which rose 9.98%. The positive sentiment spread to other regional lenders, with Alliance Bancorp and PacWest Bancorp gaining 14.09% and 0.7% respectively after a negative start. The KBW regional bank index gained 3.26%, while the S&P 500 bank index gained 2.16% as both sub-indices recouped losses.

Concerns about banks have rocked the stock market in recent days after the collapse of SVB Financial fueled fears of contagion.

Meanwhile, US Treasury Secretary Janet Yellen said the US banking system remains sound and Americans can be confident their deposits will be there when they are needed. US-listed Credit Suisse shares rose after the bank secured a credit line of up to $54 billion from the Swiss National Bank to boost liquidity and investor confidence.

The Dow Jones Industrial Average was up 371.98 points, or 1.17%, to 32,246.55, the S&P 500 was up 68.35 points, or 1.76%, to 3,960.28 and the Nasdaq Composite was up 283.23 points, or 2.48% to 11,717.28.

Data showed that the number of Americans filing new jobless claims fell more-than-expected last week, suggesting continued strength in the labor market, which could convince the Fed to hike rates further.

Weak retail sales figures, along with data showing a downward trend in producer inflation, had supported bets on Wednesday for a small rate hike by the Federal Reserve at its March 22 meeting.

Money markets are still largely touting a 25 basis point rate hike by the Fed on its policy announcement of rival TikTok’s 22-year ban.

Rising issues predominated on the NYSE at a 2.80 to 1 ratio; on the Nasdaq, a 1.95 to 1 ratio favored movers.

The S&P 500 posted 4 new 52-week highs and 22 new lows; the Nasdaq Composite posted 38 new highs and 235 new lows.

(Reporting by David Carnevali)


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