Wall Street strengthens after big bank deal

NEW YORK (AP) — Wall Street is rising Monday after regulators pushed together two huge banks over the weekend and made other moves to build confidence in the struggling industry.

The S&P 500 was 0.9% higher in afternoon trading, with stocks in the financial industry helping to lead widespread gains. The Dow Jones Industrial Average was up 407 points, or 1.3%, at 32,270, as of 1:16 p.m. Eastern time, while the Nasdaq composite was 0.3% higher.

Much attention has been on banks because they may be cracking under the pressure of the fastest flurry of hikes to interest rates in decades. Swiss banking giant UBS said Sunday it would buy its rival Credit Suisse for almost $3.25 billion in a deal quickly put together by regulators. Credit Suisse has been battling a unique set of troubles for years, but they came to a head last week as its stock price tumbled to a record low.

UBS stock rose 5.1% in Switzerland, while Credit Suisse fell 51.8%.

A group of central banks stretching from the United States to Japan also announced coordinated moves on Sunday meant to ease strains in the financial system. The moves would allow banks more access to U.S. dollars if they need them, in an echo to a practice widely used in prior crises.

In the U.S., most of the attention has been on smaller and mid-sized banks on fears that falling trust could push their depositors to pull their money all at once. That's what's called a bank run, and such a move could topple them.

First Republic Bank has been at the center of investors' crosshairs in the hunt for the industry's next victim following the second- and third-largest U.S. bank failures in history. Its shares fell 26.2% after S&P Global Ratings cut its credit rating for First Republic for a second time since Wednesday.

S&P said it could lower the rating even further despite a group of the biggest U.S. banks announcing last week they would deposit $30 billion in a sign of faith in First Republic and the larger banking industry.

While that money certainly helps, "it may not solve the substantial business, liquidity, funding, and profitability challenges that we believe the bank is now likely facing," the credit-ratings agency said.

Stocks of other smaller- and mid-sized banks, meanwhile, were much stronger.

New York Community Bancorp jumped 35.1% after it agreed to buy much of Signature Bank in a $2.7 billion deal, the Federal Deposit Insurance Corp. said late Sunday. Signature Bank became the industry's third-largest failure earlier this month after regulators seized it.

Fifth Third Bancorp rose 6.4%, and U.S. Bancorp. gained 6% for two of the biggest gains in the S&P 500.

Much of the rest of the U.S. stock market was also pushing higher, but how long that lasts is a question mark. A huge decision is looming on the calendar by the Federal Reserve.

The U.S. central bank will announce its latest move on interest rates Wednesday. For a while, Wall Street was betting it would reaccelerate its hikes because of how stubborn high inflation has remained.

Higher rates can undercut inflation by slowing the economy, but they raise the risk of a recession later on.