Wall St ends higher as bank contagion fears ease, Fed eyed

NEW YORK  – U.S. stocks jumped on Monday after a deal to rescue Credit Suisse and central bank efforts to bolster confidence in the financial system relieved investors, while participants also weighed the likelihood of a pause in rate hikes from the Federal Reserve this week.

UBS late on Sunday agreed to buy rival Credit Suisse for $3.23 billion, in a merger engineered by Swiss authorities to avoid more turmoil in the banking group.

Also, major central banks moved on Sunday to bolster the flow of cash around the world.

Global central banks open daily dollar taps to help banks

The S&P Banking index was up 0.6 percent and the KBW Regional Banking index was up 1.5 percent following sharp losses last week.

The collapse of Silicon Valley Bank and Signature Bank shook markets earlier this month, leading to a rout in banking stocks and worries that central bank monetary tightening would create a recession.

While some bank shares were still lower on Monday, the weakness appeared to be contained, said Quincy Krosby, chief global strategist at LPL Financial in Charlotte, North Carolina.

All of the major S&P 500 sectors ended higher, and the Cboe Volatility index – Wall Street’s fear gauge – fell.

U.S.-listed shares of Credit Suisse were down 53 percent on Monday, while UBS Group shares rose 3.3 percent.

Regional bank First Republic Bank fell 47.1 percent following a downgrade by S&P Global and a report of more fundraising that fueled fears about the bank’s liquidity despite a $30 billion rescue last week. Trading in shares of the bank was halted several times due to volatility.

The Dow Jones Industrial Average rose 382.6 points, or 1.2 percent, to 32,244.58, the S&P 500 gained 34.93 points, or 0.89 percent, to 3,951.57 and the Nasdaq Composite added 45.03 points, or 0.39 percent, to 11,675.54.

Helping optimism, New York Community Bancorp climbed 31.7 percent after a unit of the bank agreed to buy deposits and loans from Signature Bank.

FDIC announces deal to sell Signature Bank assets to New York Community Bancorp

Among other regional banks, PacWest Bancorp closed up 10.8 percent after the bank said deposit outflows had stabilized.

Investors are also focused on the Fed’s decision when policymakers conclude a two-day meeting on Wednesday. Before the turmoil with the banks earlier this month, many market participants had been factoring in a 50 basis-point interest rate hike from the Fed at its March meeting.

Fed funds futures now show a 28.4 percent probability of the Fed holding its overnight rate at 4.5 percent -4.75 percent , and a 71.6-percent likelihood of a 25 basis-point increase, according to CME’s FedWatch Tool.

Shares of Amazon.com fell 1.3 percent on the day following the company’s plans to slash another 9,000 jobs.

Volume on U.S. exchanges was 12.48 billion shares, compared with the 12.60 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.69-to-1 ratio; on Nasdaq, a 1.05-to-1 ratio favored advancers.

The S&P 500 posted 1 new 52-week high and 8 new lows; the Nasdaq Composite recorded 33 new highs and 298 new lows.

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