Wall Street closed higher Monday after regulators pushed together two huge banks over the weekend and made other moves to build confidence in the struggling industry. The S&P 500 rose 34.93 points, or 0.9%, to 3,951.57. The Dow Jones Industrial Average rose 382.60 points, or 1.2%, to 32,244.58. The Nasdaq composite rose 45.02 points, or 0.4%, to 11,675.54. Financial stocks were among the many to rise. Much attention has been on banks because they may be cracking under the fastest series of interest rate hikes in decades, the AP reports. Regulators announced a deal on Sunday where Swiss banking giant UBS would buy rival Credit Suisse. Treasury yields also climbed ahead of a looming decision on interest rates by the Federal Reserve on Wednesday.
A group of central banks stretching from the United States to Japan announced coordinated moves on Sunday meant to ease strains in the financial system. They should allow banks more access to US dollars if they need them, in an echo to a practice widely used in prior crises. The moves don't mean the banking industry's crisis is over, but "it’s taken one of the troublesome aspects off the table," says Ryan Detrick, chief market strategist at Carson Group. In the US, most of the attention has been on smaller and mid-sized banks on fears that falling trust could push their depositors to pull their money all at once. That’s what’s called a bank run, and such a move could topple them.
First Republic Bank has been at the center of investors’ crosshairs in the hunt for the industry’s next victim following the second- and third-largest US bank failures in history. Its shares fell 47.1% after S&P Global Ratings cut its credit rating for First Republic for a second time since Wednesday. Stocks of other smaller- and mid-sized banks, meanwhile, were much stronger. New York Community Bancorp jumped 31.7% after it agreed to buy much of Signature Bank in a $2.7 billion deal. Signature Bank became the industry’s third-largest failure earlier this month after regulators seized it.
Much of the rest of the US stock market also pushed higher, but how long that lasts is a question mark. A huge decision is looming on the calendar by the Federal Reserve. The US central bank will announce its latest move on interest rates Wednesday. For a while, Wall Street was betting it would reaccelerate its hikes because of how stubborn high inflation has remained. But all the recent stress in the banking system has pushed Wall Street to believe the Fed likely won’t pick up the pace again on its rate hikes. Instead, the bet is that it will likely stick with an increase of 0.25 percentage points, according to data from CME Group.
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