Mar 20 (Reuters) –
The S&P 500 and Dow Jones rose on Monday as a Swiss government-backed Credit Suisse bailout helped ease fears of a wider banking crisis. Meanwhile, investors have been trying to assess the likelihood that the Fed will pause in raising interest rates this week.
The Dow Jones index rose 0.94% to 32.161.24 points by 17:16 Moscow time, the S&P 500 rose 0.47% to 3.934.45 points, and the Nasdaq fell 0.24% to 11.602.76 points.
Traders upped their forecasts that the Fed is likely to pause its rate hikes on Wednesday to ensure financial stability as the collapse of Silicon Valley Bank and Signature Bank threatens to escalate into a wider crisis.
UBS said over the weekend it would acquire Credit Suisse for 3 billion francs ($3.2 billion) and take on losses of up to $5.4 billion in an emergency deal orchestrated by the Swiss authorities to prevent more turmoil in global markets.
U.S.-traded Credit Suisse tumbled more than 51% to hit a new record low, while UBS recouped losses in over-the-counter trading, up 6.09%. Shares of major US banks such as JPMorgan Chase & Co, Citigroup and Morgan Stanley added 1.71% to 2.2% in value.
First Republic Bank fell 15.5% after the announcement of additional funds raised and after S&P Global downgraded the bank’s credit rating despite $30 billion in support for the lender last week. Trading in shares was suspended due to high volatility.
Shares of PacWest Bancorp jumped 18.8% after the bank reported a stabilization of the outflow of deposits. In parallel, New York Community Bancorp stock soared nearly 40% after the bank agreed to buy back deposits and loans from Signature Bank.
“On the banking front, there is more (good news) than bad,” said Art Hogan of B Riley Wealth.
“First of all, the Credit Suisse-UBS merger certainly takes a lot of the stress off the global banking system, and Signature Bank finding a buyer over the weekend is also something investors are at least more confident about.”
Amid a rally in US 10-year Treasury yields, growth stocks and big tech stocks weakened, with Microsoft and Amazon.com losing 2.5% and 2.9%, respectively.
Traders’ expectations are almost equally divided between the possibility of keeping the Fed rate at the current level and the possibility of tightening the monetary policy by 25 basis points on March 22.
This week, investors are expecting statistics on existing home sales, as well as data on the number of jobless claims and orders for durable goods, which can help assess the state of the US economy.
The original message in English is available at the code: (Shubham Batra, Amruta Khandekar and Ankika Biswas in Bangalore)
