Wall Street gains as banking crisis worries ease

Wall Street’s main indexes have climbed as worries about the banking sector eased following a buyout deal for the deposits and loans of the failed Silicon Valley Bank.

First Citizens BancShares Inc will acquire parts of Silicon Valley Bank, which collapsed earlier this month in the largest bank failure since the 2008 financial crisis, unleashing fears about a liquidity crunch in the sector.

First Citizens’ shares jumped 44.7 per cent while First Republic Bank surged 27 per cent on a report that US authorities were considering more support for banks, which could give the embattled regional lender more time to shore up its balance sheet.

“The news about SVB being bought out may be calming some jitters that are going on in the banking sector,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

“Every bank that the FDIC steps in on that gets resolved in a manner where people don’t lose money adds another element of confidence to the sector and hopefully then people calm down,” Frederick added.

Regional banks Western Alliance Bancorp and PacWest Bancorp also climbed 4.8 per cent and 6.0 per cent respectively.

Shares of major US banks JPMorgan Chase & Co, Citigroup and Bank of America advanced between 1.6 per cent and 3.3 per cent.

The KBW Regional Banking index rose 2.2 per cent while the S&P 500 Banks index gained nearly 3.0 per cent.

Financial stocks, up about 2.0 per cent, led sectoral gains, with 10 of the 11 S&P 500 sector indexes higher.

European bank shares also rebounded from declines last week when a spike in Deutsche Bank’s credit default swaps, a type of insurance for bondholders, had exacerbated worries about the health of banks in the region.

US Treasury yields rose on Monday as fears about the banking sector eased, weighing on major growth stocks like Meta Platforms, Microsoft Corp and Apple Inc .

Traders have largely priced in that the Federal Reserve will pause rate hikes in May amid lingering worries about the banking sector stress potentially causing a steep economic downturn.

Despite the turbulence in financial markets, in the past two weeks the benchmark S&P 500 and the tech-heavy Nasdaq logged their biggest two-week gain since early February and are on course for a quarterly gain.

Investors are also awaiting a host of economic data this week, including an inflation report that could give more clues about the Fed’s monetary policy path.

In early trading, the Dow Jones Industrial Average was up 283.97 points, or 0.88 per cent, at 32,521.50, the S&P 500 was up 27.07 points, or 0.68 per cent, at 3,998.06, and the Nasdaq Composite was up 34.75 points, or 0.29 per cent, at 11,858.71.

Tesla Inc rose 3.0 per cent with Barclays expecting the electric car maker’s first-quarter deliveries to beat estimates.

Pinterest Inc gained 5.0 per cent after UBS upgraded the Social media firm’s stock to “buy” from “neutral”.

Advancing issues outnumbered decliners by a 5.48-to-1 ratio on the NYSE and 2.25-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and no new low while the Nasdaq recorded 17 new highs and 25 new lows.