Stocks closed mostly higher on a steadying Wall Street as battered banks showed more strength, at least for now. The S&P 500 rose 6.54 points Monday, or 0.2%, to 3,977.53. The Dow Jones Industrial Average rose 194.55 points, or 0.6%, to 32,432.08. The Nasdaq composite fell 55.12 points, or 0.5% to 11,768.84. Markets have been in turmoil following the second- and third-largest US bank failures in history earlier this month. Investors have been hunting for which banks could be next to fall as the system creaks under the pressure of much higher interest rates. Still, financial stocks were among the biggest gainers Monday, the AP reports.
First Citizens’ stock soared 53.6% after it said it would buy most of Silicon Valley Bank, whose failure sparked the industry’s furor earlier this month. As part of the deal, the Federal Deposit Insurance Corp. agreed to share some of the losses that may arise from some of the loans First Citizens is buying. Other banks that investors have highlighted as the next potential victims of a debilitating exodus of customers also strengthened. First Republic Bank jumped 11.8% and PacWest Bancorp rose 5%. Most of the focus in the US has been on banks that are below the size of those that are seen as "too big to fail."
A broader worry has been that all the weakness for banks could cause a pullback in lending to small and midsized businesses across the country. That in turn could lead to less hiring, less growth, and a higher risk of a recession. Many economists were already expecting an economic downturn before all the struggles for banks. "Unfortunately this is what happens when you tighten policy that quickly,” Amanda Agati, chief investment officer of PNC Asset Management Group, said about the past year's swift rise in interest rates. "Things break in the system. Some of the weakest links are starting to show up."
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