S&P 500 Boosted by Surge in US Regional Bank Stocks as Crisis Eases

Key Takeaways

• Regional banks surge on easing crisis, First Republic up 13%
• First Citizens BancShares gains 40% after buying $72B SVB assets
• Deutsche Bank rises 3.6% as German Chancellor dismisses concerns

Overview

The major U.S. stock indexes rose on Monday, as investors sought to move on from the recent crisis in the regional bank sector. This was triggered by the collapse of Silicon Valley Bank earlier this month, which led to weeks of market turmoil and more bank failures and rescues.

However, the news that First Citizens BancShares would take the deposits and loans of the failed SVB helped calm the markets, and regional banks saw broad gains as a result.

The SPDR S&P Regional Banking ETF climbed more than 3%, with First Republic and PacWest among the best-performing stocks.

At 14:51 GMT, the blue chip Dow Jones Industrial Average is trading 32381.98, up 144.95 or +0.45%. The benchmark S&P 500 Index is at 3982.49, up 11.50 or +0.29% and the technology-based NASDAQ Composite is trading 11829.14, up 5.18 or +0.04%.

Investors Cautiously Optimistic as Markets Recover from Recent Turbulence

Overall, the major U.S. stock indexes are trading higher, building on last week’s gains. The ability of authorities to take swift action in response to bank failures and market turbulence has helped to calm investors, and regional banks have seen a boost in the wake of the SVB collapse.

While the situation remains unsettled, the markets appear to be gradually recovering, and investors are hoping for a return to stability in the near future.

Regional Bank Stocks Surge as Crisis May Be Easing in the US

Regional bank stocks surged on Monday after reports suggested that the crisis facing the sector in the United States could be easing. First Republic’s shares rose by 13%, while PacWest Bancorp and Western Alliance gained 2.5% and 5.5%, respectively.

Bloomberg News reported that US officials are considering expanding federal programs that provide liquidity to banks to help First Republic find a buyer. CNBC also reported that deposit inflows into large banks from smaller regionals have slowed down.

Regional banks have faced significant pressure this month, with regulators closing SVB and Signature Bank due to significant deposit outflows.

First Republic has been a point of concern, and eleven larger banks deposited $30bn to show confidence in the smaller firm. Monday’s gains followed the announcement that First Citizens BancShares agreed to buy a large chunk of SVB.

Stock Market Moves: First Citizens BancShares Surges 40%

On Monday, several stocks experienced significant movements in the stock market.

Pinterest saw a rise of 4.3% after UBS upgraded it to buy, predicting that the company’s advertising strategy would lead to a potential increase of more than 25% in shares.

First Citizens BancShares witnessed a 40% surge in its shares after announcing its acquisition of around $72 billion of Silicon Valley Bank assets at a discount of $16.5 billion.

Caterpillar, however, faced a decline of 1.2% as Baird downgraded the machinery company to underperform, citing potential headwinds driven by a “meaningful slowdown” in new small- and medium-sized nonresidential projects in 2024 due to ongoing turmoil with regional bank lenders.

Deutsche Bank, which had experienced steep losses last week, saw a rise of 3.6% in its U.S.-listed shares in premarket trading on Monday.

Citi maintained its buy rating on the stock, despite continuing worries toward the health and stability of the overall banking sector.

German Chancellor Olaf Scholz dismissed concerns that Deutsche could be subject to fallout similar to Credit Suisse, stating that the firm is still “very profitable” and “fundamentally modernized”.