The S&P 500 gained ground on Thursday as investors felt more secure following reports of probable help for a carefully watched bank and a recovery in smaller bank shares.
With 97 points, the Dow Jones Industrial Average index increased. The Nasdaq Composite rose 1%, outpacing the S&P 500’s 0.7% rise.
According to The Wall Street Journal, JPMorgan Chase and Morgan Stanley were among the major banks in negotiations for a potential capital infusion to the struggling First Republic Bank. Sources quoted by The Journal indicated that a full takeover was feasible, although it was thought unlikely.
As a result of the news, First Republic Bank traded off the day’s lows and the SPDR S&P Regional Banking ETF (KRE) briefly into the green. The shares were suspended due to volatility and were still down 20%.
The overnight news from Credit Suisse that it will borrow up to approximately $54 billion from the Swiss National Bank to ensure short-term liquidity also helped to bolster markets. After news that Credit Suisse’s largest investor, the Saudi National Bank, will not be providing further support, the troubled bank dropped to a record low on Wednesday. On Thursday, stocks with U.S. exchanges rose by 5%.
The actions on Thursday came after the news regarding Credit Suisse caused declines in other European banking equities and rippled across U.S. markets on Wednesday. As Silicon Valley Bank and Signature Bank’s closures in recent days raised worries about a ripple effect in the industry, investors have been closely monitoring bank stocks.
Greg Fleming, CEO of Rockefeller Capital Management and former president of Morgan Stanley Wealth Management, stated on CNBC’s “Squawk Box” that another similarity to 2008 is the market’s search for the next weakest link. And uninsured deposits served as a stand-in.
The European Central Bank’s announcement of an additional rate hike of 50 basis points was followed by investors all across the world. The choice was made as US investors prepared for the Federal Reserve policy meeting the following week.
Greg Bassuk, CEO of AXS Investments, said: “During the past week, developments in the banking industry have added a layer of trepidation around investor confidence. What does it signify for Fed policy and interest rates, though, is what investors are eventually linking that back to.