Stocks rise on Wall Street as bank fears ease further
By Stan Choe, The Associated Press on March 29, 2023.
NEW YORK (AP) – U.S. stocks are following markets in Europe and Asia higher Wednesday as Wall Street shakes off a bit more of the fear that dominated it earlier this month. The S&P 500 was 1% higher in early trading. The Dow Jones Industrial Average was up 230 points, or 0.7%, at 32,624, as of 9:40 a.m. Eastern time, while the Nasdaq composite was 1.3% higher. They followed similar sized gains in other markets around the world, and the S&P 500 is on track to close what’s been a tumultuous month with a modest gain. That’s despite the month being dominated by worries about banks and whether the industry is cracking under the pressure of much higher interest rates. Big actions by regulators recently have calmed some of the worries around banks, including a government-brokered takeover by one Swiss banking giant of another. In that deal, UBS said Wednesday it’s bringing back former CEO Sergio Ermotti to help it absorb its troubled rival, Credit Suisse. Ermotti led the bank through its turnaround following the 2008 financial crisis. UBS stock in Switzerland rose 4.5%. Other big banks across the continent also strengthened, which helped indexes there to rise. Germany’s DAX returned 1.1%, and France’s CAC 40 rose 1.4%. In London, the FTSE 100 rose 1%. On Wall Street, the vast majority of financial stocks in the S&P 500 were rising. In the U.S., most of the scrutiny has been on smaller and midsized banks instead of the titans. That’s because those smaller banks are seen as more at risk of suffering a sudden stampede of customers pulling their money, similar to the run that toppled Silicon Valley Bank earlier this month. It was the second-largest U.S. bank failure in history. Some of the banks recently seen as most at risk were steadying. First Republic Bank rose 5.5%, while PacWest Bancorp. rose 1.2%. The Federal Deposit Insurance Corp. still has many of Silicon Valley Bank’s assets in its receivership after California regulators seized it earlier this month. But it sold much of the bank’s assets at the start of this week. Regulators earlier this month also announced programs to help banks raise cash more easily, which helped ease some of the strain. That, plus the implicit promise that U.S. officials have seemed to make about protecting depositors at other banks, should help support the industry, analysts say. By Wednesday, a measure of fear among stock investors on Wall Street was back down near its lowest point since March 8, the day before Silicon Valley Bank’s customers suddenly yanked out $42 billion in a panicked dash. Easing fears about the banking system have helped Treasury yields rise in the bond market, following some historic-sized moves earlier this month. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.59% from 3.57% late Tuesday. The two-year yield, which moves more on expectations for the Fed and has been particularly unsettled, was holding steady at 4.08%. Earlier this month, it went from more than 5% to less than 3.80%, which is a massive move. The banking industry’s struggles have cranked up the pressure on the Federal Reserve and other central banks, which suddenly must navigate an even more difficult path. Typically, the still-high inflation seen around the world would call for even higher interest rates. But that would risk applying more pressure on banks, which could pull back on lending and squeeze oxygen out of the economy. Traders are split on whether the Federal Reserve will raise interest rates again at its next meeting in May or take a pause. If it doesn’t raise rates, that would be the first time in more than a year. The Fed’s key overnight rate has already zoomed to a range of 4.75% to 5%, up from virtually zero at the start of last year. Higher rates can slow inflation, but they do so by bluntly hammering the entire economy. That raises the risk of a recession while also dragging down prices for stocks and other investments. Traders are largely betting the Fed will have to cut rates as soon as this summer, something that can act like steroids for markets. But the Fed has been hinting it sees perhaps one more hike before holding rates steady through this year. Many professionals on Wall Street are taking the Fed at its word, saying rate cuts would likely come more quickly only if the economy falls into a deep recession. ___ AP Business Writers Joe McDonald and Matt Ott contributed. 21-20
