S&P 500 Nears 3-Week High As Bank-Fueled Market Anxiety Calms

Topline

Stocks gained yet again Monday as badly bleeding bank stocks bounced back and major indexes continued to recover their March losses.

Key Facts

The Dow Jones Industrial Average rose 270 points, or 0.9%, while S&P 500 and tech-heavy Nasdaq climbed 0.7% and 0.6%, respectively.

The S&P is hovering at its highest level since March 7, 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 18% and shares of First Citizens, which announced overnight it acquired Silicon Valley Bank, jumped 44%.

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.”

Surprising Fact

More than a dozen U.S. bank stocks cratered to multi-year lows 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.

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.

Further Reading

Silicon Valley Bank Acquired By First Citizens After Failure (Forbes)

These Bank Stocks Hit Lows—Some Even All-Time Lows—This Month (Forbes)