Stocks rise on Wall Street 03/21 09:28
Stocks are rising on a calming Wall Street Tuesday, even the banks most
beaten down by the industry's crisis, on hopes for more help from the U.S.
NEW YORK (AP) -- Stocks are rising on a calming Wall Street Tuesday, even
the banks most beaten down by the industry's crisis, on hopes for more help
from the U.S. government.
The S&P 500 was 1% higher in early trading. The Dow Jones Industrial Average
was up 294 points, or 0.9%, at 32,538, as of 9:40 a.m. Eastern time, while the
Nasdaq composite was 0.9% higher.
Markets around the world have pinballed sharply this month on worries the
banking system may be cracking under the pressure of the fastest set of hikes
to interest rates in decades. If the S&P 500 squeezes out a gain, it would mark
its first back-to-back rise in two weeks.
In the U.S., shares of smaller and mid-sized banks rose after prepared
remarks indicated Treasury Secretary Janet Yellen would tell a bankers' group
more government assistance "could be warranted" if risks arise that could bring
down the system.
Earlier this month, the U.S. government said it would make depositors at
Silicon Valley Bank and Signature Bank whole, even those with more than the
$250,000 limit insured by the Federal Deposit Insurance Corp. They were the
second- and third-largest U.S. bank failures in history.
They had struggled as depositors rushed to pull their money out en masse.
Such runs can topple a bank, and investors have since been hunting for the next
one that could fall. Much focus has been on First Republic Bank, which shares
some similar traits with Silicon Valley Bank, and its stock had lost 90% for
the year through Monday.
It jumped 23.7% Tuesday.
Other smaller and midsized banks also rallied, including a 6% climb for
Comerica and a 5.7% gain for Zions Bancorp.
Hopes for the banking industry began to turn over the weekend after
regulators pushed together two huge Swiss banks. Shares of both banks in that
deal rose Tuesday in Switzerland, including a 7% jump for acquirer UBS. Credit
Suisse, meanwhile, rose 2.6% after tumbling a day earlier.
Credit Suisse had longstanding problems that were relatively unique, but all
banks on both sides of the Atlantic have the shared challenge of navigating a
world with much higher interest rates than a year earlier.
Central banks have jacked up rates at a blistering pace in hopes of getting
high inflation under control. But such moves act like huge hammers with little
nuance. They try to bring down inflation by slowing the entire economy.
That raises the risk of a recession later on. Higher rates also hurt prices
for stocks and other investments. That's one of the factors that hurt Silicon
Valley Bank, which saw the value of its bond investments drop with the rise in
The Federal Reserve is beginning its latest meeting on interest rates
Tuesday, with an announcement slated for Wednesday.
Earlier this month, much of Wall Street was bracing for the Fed to
reaccelerate its hikes and raise by 0.50 percentage points. A string of reports
on the economy came in hotter than expected, including data on the job market,
retail sales and inflation itself.
But all the turmoil in the banking industry has traders betting the Fed will
stick with an increase of 0.25 points.
Traders are even beginning to bet that the Fed may cut interest rates later
this year. Rate cuts can act like steroids for markets, and they would also
give the economy and banks more room to breathe. On the downside, they could
also give inflation more fuel.
"Can the Federal Reserve really continue to hike rates in the face of a
banking crisis?" Clifford Bennett of ACY Securities said in a report. "There
are ongoing stresses in the banking system that will only grow with further
In markets abroad, stocks rallied across Europe and Asia.
In the bond market, huge swings continue to rock the market. Yields have
been mostly plunging this month on expectations for an easier Fed. The yield on
the two-year Treasury, for example, tumbled from its highest level since 2007,
above 5%, back below 4%, which is a massive move for it.
It rose to 4.18% from 3.97% late Monday.
The 10-year Treasury yield, which helps set rates on mortgages and other
important loans rose to 3.58% from 3.44%.