Stocks closed mostly higher on a steadying Wall Street as battered banks showed more strength, at least for now.
Markets have been in turmoil following Silicon Valley Bank’s collapse, the second-largest U.S. bank failure in history, earlier this month, and then the third-largest failure, by New York-based Signature Bank.
Investors have been hunting for which banks could be next to fall as the system creaks under the pressure of much higher interest rates.
On Wall Street, the S&P 500 eked out a 0.2 percent gain to 3,977.53 after having been up by as much as 0.8 percent. Banks and energy stocks led the gainers in the benchmark index, outweighing losses in technology and communications companies.
The Dow Jones Industrial Average rose 0.6 percent to 32,432.08, while the Nasdaq composite fell 0.5 percent, to 11,768.84, reflecting losses in Google parent Alphabet and other tech companies. Gainers outnumbered decliners on the New York Stock Exchange by nearly 3-1. The S&P and Nasdaq are coming off two straight weekly gains.
First Citizens Bank’s stock soared 53.7 percent 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 percent and PacWest Bancorp rose 3.5 percent. Most of the focus in the U.S. 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.”
The Federal Reserve has pulled its key overnight rate to a range of 4.75 percent to 5 percent, up from virtually zero at the start of last year. It indicated last week that the troubles in the banking system could end up acting like rate hikes on their own, by slowing lending.
Huge, quick swings in expectations for the Fed have caused historic-sized moves in the bond market.
Yields jumped Monday in their latest lunge. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.53 percent from 3.37 percent late Friday. It was above 4 percent earlier this month.
Lower rates can act like steroids for stocks, and technology and other high-growth stocks tend to get a particularly big boost. That has helped the S&P 500, which is dominated by such Big Tech stocks as Apple and Microsoft.
Other areas of the market that don’t benefit from such Big Tech stocks have been weaker. The Russell 2000 index of smaller stocks, for example, is on track for a 7.6 percent loss this month versus a 0.2 percent gain for the S&P 500.
The Russell out-gained the broader market Monday, however, adding 1.1 percent, to 1,753.67.
In energy trading, benchmark U.S. crude lost 2 cents to $72.79 a barrel in electronic trading on the New York Mercantile Exchange. It gained $3.55 to $72.81 per barrel on Monday.
Brent crude, the international standard, fell 21 cents to $77.91 a barrel.
In currency trading, the U.S. dollar fell to 130.62 Japanese yen from 131.56 yen. The euro cost $1.0813, up from $1.0804.
