STOCKS CLIMB, BUT SHARES OF STRUGGLING CALIF. BANK SLIDE
NEW YORK — Stocks rose on Wall Street 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 climbed 34.93 points, or 0.9%, to 3,951.57.
Much attention has been on banks because they may be cracking under the pressure of much higher interest rates. Swiss banking giant UBS said Sunday it would buy its troubled 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 problems for years, but they came to a head last week as its stock price tumbled to a record low.
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. They should allow banks more access to U.S. dollars if needed, in an echo to a practice widely used in prior crises.
The moves don’t mean the banking industry’s crisis is over, but “it’s taken one of the troublesome aspects off the table,” said Ryan Detrick, chief market strategist at Carson Group.
The late Sunday announcements by regulators may be reminiscent of the 200708 financial crisis that wrecked the global economy, but many investors see big differences between then and now.
“The market is trying to digest: Is this just a few bad financial companies that have really made some bad decisions, or is the whole thing a house of cards?” Detrick said. “We’re optimistic that it’s multiple banks in a bad situation but not the entire system.”
However, shares of First Republic Bank, based in San Francisco, fell another 47% Monday as investors remain uneasy about the bank’s financial condition even after a group of the nation’s largest financial institutions teamed up on a $30 billion rescue package.
Trading in First Republic shares was halted numerous times due to the volatility. The shares have dropped around 88% in the past two weeks.
First Republic Bank received a $30 billion rescue package from 11 of the biggest U.S. banks last week in an effort to prevent its collapse. Over the weekend, the bank’s credit rating was downgraded by S&P Global Ratings, which said that the rescue package should ease near-term liquidity pressures, but it “may not solve the substantial business, liquidity, funding, and profitability challenges” that it believes the San Francisco-based bank is now likely facing.
Volume surpassed 184 million shares, compared with the daily average of less than 14 million shares.
In other banking news, the bidding process for the successor of Silicon Valley Bank is being extended by the Federal Deposit Insurance Corp. to give more time to work out a potential deal. The FDIC said Monday that there’s been “substantial interest” from multiple parties for Silicon Valley Bridge Bank.