US: Stocks end higher but First Republic shares pummelled

WALL Street stocks overcame early weakness to end higher Monday (Mar 20) on hopes that turmoil in the banking sector may be easing, after Switzerland’s largest bank UBS agreed to a takeover of troubled rival Credit Suisse.

Switzerland was in shock after UBS agreed under pressure from Swiss authorities to swallow up the country’s second-largest bank for around US$3.2 billion, in a step aimed at containing economic turbulence.

Hours after this announcement on Sunday, the US Federal Reserve and other major central banks unveiled a coordinated effort to improve banks’ access to liquidity — with the special drive being launched on Monday.

The Dow Jones Industrial Average jumped 1.2 per cent to end at 32,244.58, while the broad-based S&P 500 Index rose 0.9 per cent to 3,951.57.

The tech-heavy Nasdaq Composite Index picked up 0.4 per cent to 11,675.54.

But shares of First Republic Bank plummeted by 47.3 per cent, even as a coalition of US lenders said last week they would deposit US$30 billion into it.

This came as S&P cut its credit rating for First Republic to B+ from BB+ on Sunday.

Shares of other regional banks, however, moved higher.

PacWest Bancorp was up 10.8 per cent while KeyCorp rose 1.2 per cent.

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“I think the market is breathing a sigh of relief, that something much worse could have happened. And so far, it hasn’t,” said Andy Kapyrin, partner at RegentAtlantic.

But he cautioned that “it’s too early to say that the whole thing’s over.”

“People will continue to worry until well past the time when everything’s okay,” he added.

Looking ahead, investors will be closely watching the Fed’s interest rate decision after a policy meeting this week.

While Fed policymakers have embarked on an aggressive campaign to contain inflation, officials will have to balance efforts against financial sector stability in their decision set to be unveiled Wednesday. AFP