Wall Street gains as bank contagion fears subside

NEW YORK: Wall Street’s main indexes climbed on Tuesday after the rescue of Credit Suisse calmed nerves about a bigger banking crisis, while investors awaited the outcome of the Federal Reserve’s monetary policy meet.

Traders largely expect a 25-basis-point rate hike from the Fed on Wednesday, half the 50-bps increase expected before the banking crisis triggered by Silicon Valley Bank and Signature Bank’s collapse. The state-backed takeover of Credit Suisse by UBS and steps taken by central banks to boost liquidity have eased contagion fears for the broader banking sector, but analysts believe the crisis hasn’t been fully averted.

“While it’s a plus that banks so far have been rescued in the sense of deposits, I don’t think we’ve seen the end of the turmoil,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

“The last thing the Fed wants to do is to create havoc in the markets ... and the best thing that they could do is just take a pause and then revisit it in May.” The US banking system is stabilizing after strong actions from regulators, but further steps to protect bank depositors may be warranted if smaller institutions suffer deposit runs that threaten more contagion, said US Treasury Secretary Janet Yellen.

Boosting the S&P 500, major US banks like JPMorgan Chase, Citigroup and Bank of America advanced around 3%. Beaten-down regional lenders climbed, with First Republic Bank rebounding 25% after hitting a record low on Monday.

JPMorgan CEO Jamie Dimon is leading talks with other big banks on fresh steps to stabilise First Republic with a possible investment into the lender, the Wall Street Journal reported on Monday. Peers PacWest Bancorp and Western Alliance Bancorp rose 11.8% and 11%, respectively.

Among major movers, Meta Platforms Inc jumped 1.8% after Morgan Stanley upgraded the stock to “overweight” from “equal weight”, while Tesla Inc soared 3.7% on expectations of a strong quarter in China following the latest retail sales data. At 9:41 a.m. ET, the Dow Jones Industrial Average was up 292.28 points, or 0.91%, at 32,536.86, the S&P 500 was up 39.32 points, or 1.00%, at 3,990.89, and the Nasdaq Composite was up 108.64 points, or 0.93%, at 11,784.18. All the 11 S&P 500 sector indexes were in the green, with financials leading the advance.