Wall Street’s main indices rose after the Credit Suisse bailout calmed nerves over a larger banking crisis while investors await the outcome of the Federal Reserve’s monetary policy meeting.
Traders largely expect a 25 basis point rate hike from the Fed on Wednesday, half of the 50 basis point increase expected before the banking crisis triggered by the collapse of Silicon Valley and Signature Bank.
State-backed UBS’s takeover of Credit Suisse and steps by central banks to boost liquidity eased fears of contagion spreading to the broader banking sector, but analysts believe the crisis has not been entirely averted.
“While the bank bailout so far in terms of deposits is a plus, I don’t think we’ve seen the end of the turmoil,” said Peter Cardillo, chief market economist at Spartan Capital Securities.
“The last thing the Fed wants to do is wreak havoc on the markets…the best thing it could do is just pause and then revisit it in May.”
US Treasury Secretary Janet Yellen said the US banking system is stabilizing after strong action by regulators, but further steps may be warranted to protect bank depositors if smaller institutions suffer from deposits that threaten further contagion.
As the S&P 500 strengthened, major US banks such as JPMorgan Chase, Citigroup and Bank of America advanced about 3.0 percent.
Battered regional lenders rallied, with First Republic Bank rebounding 25 percent after hitting a record low on Monday.
JPMorgan CEO Jamie Dimon is leading talks with other large banks about new steps to stabilize the First Republic with a possible investment in the lender, The Wall Street Journal reported Monday.
Peers PacWest Bancorp and Western Alliance Bancorp rose 11.8 percent and 11 percent, respectively.
Among the big movers, Meta Platforms Inc jumped 1.8 percent after Morgan Stanley lifted the stock to “overweight” from “equal weight” while Tesla Inc rose 3.7 percent on expectations of a strong quarter in China after the latest retail sales data.
In early trading, the Dow Jones Industrial Average rose 292.28 points, or 0.91 percent, to 32,536.86 points, the S&P 500 rose 39.32 points, or 1.00 percent, to 3,990.89 points, and the Nasdaq Composite Index rose 108.64 points, or 0.93 points. cent, at 11,784.18.
All 11 sector indices of the S&P 500 were in the green, with financial institutions making progress.
Nvidia Corp rose 0.7 percent ahead of the chip maker’s annual conference for software developers later in the day.
PDD Holdings Inc fell 1.8 percent after Alphabet Inc suspended the Play version of the Chinese e-commerce platform’s Pinduoduo app following malware issues.
Advances outnumbered losers 6.22-to-1 on the NYSE and 4.31-to-1 on the Nasdaq.
The S&P posted five new highs in 52 weeks and no new lows while the Nasdaq posted 19 new highs and 42 new lows.
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