Dow Climbs 200 Points As SVB Purchase Spurs Bank Rebound

Topline

A bounce back from badly bleeding bank stocks anchored a mostly positive trading session Monday, with shares of Silicon Valley Bank’s new owner First Citizens BancShares skyrocketing, though one prominent analyst warned the latest crisis could spell further trouble for stocks should conditions deteriorate further.

Frowns have subsided on Wall Street in recent days.

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Key Facts

The Dow Jones Industrial Average rose 195 points, or 0.6%, while the S&P 500 climbed 0.2% and the tech-heavy Nasdaq slipped 0.5%.

The S&P closed at its second-highest level since March 8, the day before since-failed Silicon Valley Bank’s growing cracks caused equity prices to plummet, while the Dow is up 4% from its 2023 low achieved March 15 but down more than 2% over the last three weeks.

Leading Monday’s rally were bank stocks, as shares of the teetering First Republic gained 12% and shares of First Citizens, which announced overnight it acquired Silicon Valley Bank, jumped 54%.

Also gaining were large bank stocks including Bank of America, Wells Fargo and Citigroup, each of which jumped 3% or more.

Several other weekend developments helped calm investors, as reports emerged indicating the pace of deposit outflows from smaller banks slowed and federal regulators mulled an extension of a lending backstop designed to aid First Republic.

Crucial Quote

The “panic” from earlier this month has subsided to possibly “allow for a more rational market to re-emerge,” Oanda analyst Craig Erlam declared in a Monday note to clients, though Erlam cautioned he may simply be “too hopeful for a Monday.”

Tangent

Cryptocurrency exchange Coinbase was Monday’s worst-performing U.S. stock with a market value of greater than $10 billion, according to Yahoo Finance data. Coinbase’s slide came after federal financial regulators filed a lawsuit against rival exchange Binance for allegedly violating commodity trading laws. Bitcoin sank more than 3% following the lawsuit, while Binance’s token shed more than 5% in value.

Contra

Though stock prices have recovered, the risk appetite among non-institutional investors remains dampened. In a Friday note to clients, Goldman Sachs forecasted American households will be net sellers of $750 billion in equities this year, instead opting to put their money in safer assets like money markets and bonds. Equity indexes are “unlikely to hold up under this classic migration to higher ground if a flood arrives,” Morgan Stanley strategist Michael Wilson wrote in a Monday note.

Surprising Fact

More than a dozen U.S. bank stocks cratered to multi-year lows earlier this month, as giants like Bank of America sank to their lowest levels since the early days of the pandemic and regional banks like First Republic, PacWest, Western Alliance and Zions fell to all-time lows.