A security guard at the New York Stock Exchange (NYSE) in New York, US, on Tuesday, March 28, 2023.
Victor J. Blue | Bloomberg | Getty Images
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U.S. stocks rallied Wednesday as both banks and big tech rebounded. For markets still reeling from the banking crisis, no news is good news.
What you need to know today
- UBS’ incoming (and previous) CEO, Sergio Ermotti, is known for turning around a troubled bank — which is why he was tasked to oversee the merger with Credit Suisse, UBS said. Traders liked the bank’s new leader — Swiss-listed shares of UBS climbed 3.72%, and U.S.-listed ones jumped 4.31%.
- And reestablishing trust in a battered bank is exactly what UBS needs to do as it buys Credit Suisse, going by a report released Wednesday by the U.S. Senate Finance Committee. It claimed Credit Suisse has been helping wealthy American clients evade U.S. taxes for years, even after the bank pleaded guilty in 2014 to those very charges.
- A group of tech leaders and academics, including Elon Musk, Steve Wozniak and Yuval Noah Harari, wrote an open letter calling on artificial intelligence labs to pause “the training of AI systems more powerful than GPT-4.” They think if A.I. is allowed to develop at its current pace without safety protocols, it might cause humans to “lose control of our civilization.”
- PRO The tumult in banks has affected regional banks badly — some have lost more than 30% in value this month. But Goldman Sachs said there are some regional banks that could emerge from the turmoil as winners.
The bottom line
Yesterday was an excellent day for stocks, and the biggest banking news was positive (maybe not for outgoing UBS CEO Ralph Hamers, but definitely in terms of shareholder value). Could we finally be turning a corner after three tumultuous weeks?
First, UBS’ new (old) CEO. Both analysts and investors liked the Swiss bank’s pick. As Beat Wittmann, partner at Zurich-based Porta Advisors, told CNBC, Ermotti is “proven, trustworthy in the view of the public at large and also the industry.” Investors agreed — UBS shares jumped in both Switzerland and the U.S.
The appointment seemed to assuage fears of wider banking turmoil. In the U.S., banks rose on the news. Citigroup climbed 1.61%, Wells Fargo advanced 2.12% and Morgan Stanley increased 1.6%. The SPDR S&P Regional Banking ETF (KRE) added 1.07%.
After a two-day slide, big tech rebounded, too. The biggest winners yesterday: Amazon popped 3.1%, Netflix climbed 2.63% and Meta rose 2.33%. Investors may have been encouraged by Alibaba’s split into six units, which could serve as a model for other big tech companies.
Micron’s report that the company’s inventory problems are improving helped its shares jump 7.19% and led a rally in semiconductor stocks — a feat more impressive considering the company announced a bigger-than-expected loss for the last quarter.
All major indexes gained on the back of these moves. The Dow Jones Industrial Average rose 1%, the S&P 500 added 1.4% and the Nasdaq Composite climbed 1.8%. Clearly, market sentiment was running high yesterday, even if there was no clear cause for it. Or perhaps it was precisely the lack of any significant event that cheered markets. As Ed Yardeni, president of Yardeni Research, put it, “Every day that something doesn’t break is a good day.”
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