Bank lifeline gives investors optimism

Stocks surge after $30 billion promised for First Republic

NEW YORK — Stocks rallied Thursday after a group of big banks offered a lifeline to the bank that investors had zeroed in on in their hunt for the industry’s next victim.

The S&P 500 jumped

1.8 percent for its best day in nearly two months after 11 of the biggest banks said they would deposit a combined $30 billion into First Republic Bank. The Dow Jones Industrial Average erased an early loss of 300 points to climb 371 points, or 1.2 percent, while the Nasdaq composite jumped 2.5 percent.

All told, the S&P 500 rose 68.35 points to 3,960.28.

The Dow gained 371.98 to 32,246.55, and the Nasdaq jumped 283.22 to 11,717.28.

This week has been a whirlwind for markets globally on worries that banks may be bending under the weight of the fastest set of hikes to interest rates in decades. The concerns have been flaring since Friday’s collapse of Silicon Valley Bank, which was the second-largest bank failure in U.S. history.

Since then, Wall Street has tried to root out banks with similar traits, such several depositors with more than the $250,000 limit insured by the Federal Deposit Insurance Corp. or several tech startups.

First Republic Bank has been at the center of the market’s swivels, and it rose 10 percent Thursday after slumping as much as 36 percent early in the day. In the statement announcing their deposits, the group of 11 banks said the move “reflects their confidence in First Republic and in banks of all sizes.”

Besides stocks, Treasury yields also strengthened suddenly after the first reports of a possible rescue by the industry. That was a sign of increased confidence from the bond market.

Across the Atlantic, European stocks rose after the European Central Bank announced a hefty increase to interest rates. Concerns there were also easing about another bank, Credit Suisse, which helped cause markets to tumble sharply Wednesday. The Swiss bank has been battling troubles for years, but its plunge to a record low raised concerns just as more attention was shining on the wider industry.

Credit Suisse’s stock in Switzerland leaped 19.2 percent Thursday after it said it will strengthen its finances by borrowing up to $54 billion from the Swiss National Bank.

The yield on the 10-year Treasury rose to 3.57 percent from 3.47 percent Wednesday. Earlier, it dropped as low as 3.37 percent and has been veering sharply since climbing above 4 percent this month.