Stabilisation of banking recovered US stock indexes

Wall Street saw stock indexes rise on Monday as fears of a crisis eased thanks to bank bailouts and as investors hope for a slower pace of rate hikes by the US central bank, the Fed.

The Dow Jones gained 1.2 percent on the day, 32,244 points, while the S&P 500 rose 0.89 percent, 3,951 points, and the Nasdaq index 0.39 percent, to 11,675 points.

The growth of the market is a consequence of the stabilization of the banking sector, due to which the fears of a new crisis, which reigned in the market after the recent collapse of two American banks – Silicon Valley and Signature – and due to the problems of several other banks, including the Swiss Credit Suisse, have subsided.

Over the weekend, Swiss monetary authorities managed to hammer out a deal under which UBS will buy Credit Suisse for $3.2 billion, but with huge write-downs by Switzerland’s second-largest bank, leading to heavy losses for Credit Suisse shareholders and bondholders. That caused a sharp drop in the bank’s share price but reassured investors who feared the spillover of problems to other banks.

The fall of the Fed

The share price of the American First Republic Bank fell sharply, almost 50 percent, even though at the end of last week, several large banks deposited about 30 billion dollars in deposits in it. However, due to S&P’s decision to downgrade the bank and news that it is still withdrawing money from the Fed’s emergency liquidity support program, First Republic’s stock remains under pressure.

However, the prices of most other shares in the banking sector stabilized, so yesterday, the S&P index of that sector rose by 0.6 percent.