Wall Street ends volatile week higher as Fed officials ease bank fears
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[March 25, 2023] By
NEW YORK (Reuters) - U.S. stocks closed higher on Friday, marking the
end of a tumultuous week as Federal Reserve officials calmed investor
fears over a potential liquidity crisis in the banking sector.
While all three major U.S. stock indexes started the session sharply
lower on the heels of a sell-off among European banks, those losses
reversed by closing bell, repeating the intraday roller coaster ride of
At the conclusion of an up-and-down week, marked by a Fed interest rate
hike and mounting worries over the health of the banking system, all
three indexes notched weekly gains.
"Equity markets drifted higher as concerns lingered about another
banking flare up in the U.S. or abroad," said David Carter, managing
director at JPMorgan Private Bank in New York. "Wall Street is taking
its cues from Washington and other capitals as it relates to interest
rates and banking regulations."
In separate appearances, three regional Fed bank presidents said that
their confidence that the banking system was not facing a liquidity
crisis is what led to the decision to implement a 25 basis point policy
rate hike on Wednesday.
But while Fed officials continue to see additional rate hikes as a
strong possibility, financial markets are now favoring the likelihood of
a no hike at all at the conclusion of its next policy meeting in May.
"The Fed may be jaw-boning a bit as it says more rate increases may be
coming this year," JPMorgan's Carter added. "It helps both their
inflation goal and suggests confidence in our economic system."
Worries over potential contagion beyond regional banks threatening to
spread to their larger peers was sparked by a sell-off of European bank
That sell-off was prompted by the rising cost of insuring Deutsche
Bank's debt, expressed by its credit default swaps, coming on the heels
of the state-sponsored buyout of Credit Suisse, has fed into the
narrative of sector-wide stress.
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Traders work on the floor of the New
York Stock Exchange (NYSE) in New York City, U.S., March 23, 2023.
But those worries eased by mid-afternoon.
While the S&P Bank index ended modestly lower, the KBW Regional Bank
index jumped 2.9%.
The Dow Jones Industrial Average rose 132.28 points, or 0.41%, to
32,237.53, the S&P 500 gained 22.27 points, or 0.56%, to 3,970.99
and the Nasdaq Composite added 36.56 points, or 0.31%, to 11,823.96.
Nine of the 11 major sectors in the S&P 500, with defensive sectors
such as utilities and real estate enjoying the biggest percentage
gains. Consumer discretionary and financials were the two losers.
U.S.-traded shares of Deutsche Bank dropped 3.1%.
Shares of major U.S. banks, such as JPMorgan Chase & Co, Wells Fargo
pared their losses but still ended lower, while Bank of America
Regional lenders PacWest Bancorp, Western Alliance Bancorp jumped
3.2% and 5.8%, respectively, while First Republic Bank dropped 1.4%.
Activision Blizzard jumped 5.9% after the UK competition regulator
dropped some competition concerns in the Microsoft-Activision deal.
Advancing issues outnumbered declining ones on the NYSE by a
1.47-to-1 ratio; on Nasdaq, a 1.26-to-1 ratio favored advancers.
The S&P 500 posted four new 52-week highs and 35 new lows; the
Nasdaq Composite recorded 34 new highs and 298 new lows.
Volume on U.S. exchanges was 11.08 billion shares, compared with the
12.84 billion average over the last 20 trading days.
(Reporting by Stephen Culp; Additional reporting by Amruta Khandekar
and Ankika Biswas in Bangalore; Editing by Marguerita Choy)
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