Wall Street, reassured on the banks, up before the Fed

by Stephen Culp

NEW YORK (Reuters) – The New York Stock Exchange ended sharply higher on Tuesday as fears over the banking sector faded and investors turned their attention to the U.S. Federal Reserve (Fed), which is expected to proceed on Wednesday. a 25 basis point rate hike following its two-day meeting.

The Dow Jones Industrial Average gained 0.98%, or 316.02 points, to 32,560.60 points.

The broader S&P-500 gained 51.30 points, or 1.30%, to 4,002.87 points.

The Nasdaq Composite advanced for its part by 184.57 points (1.58%) to 11,860.11 points.

In the wake of gains in the energy and financial sectors, in particular, the three main Wall Street indices settled comfortably in the green, also benefiting from the rebound in the S&P-500 banking index.

The fall of two banks last week, followed by the bailout of First Republic Bank and the takeover of Credit Suisse, raised fears of contagion in the financial sector, fueling global concerns over a possible recession.

“It’s a small rebound after the downward movement related to questions surrounding regional banks,” commented Robert Pavlik, portfolio manager at Dakota Wealth, in Fairfield, Connecticut.

“A lot of effort has been made to extinguish the crisis of confidence,” he said, citing in particular the measures of the US Treasury Department and the Fed. “There is renewed interest in equities,” he added.

Treasury Secretary Janet Yellen said the US banking system had been stabilized thanks to decisive action by regulators, according to remarks prepared for a speech before the National Bankers Association, while warning that further action could be required.

Now, all eyes are on the Fed, which started a meeting during the day in which it should adjust its economic forecasts and, presumably, proceed with another rate hike in order to continue its fight against inflation.

The US central bank is in a situation from which it cannot emerge victorious, said Robert Pavlik. “She’s doing her job of raising rates to fight inflation, and she needs to keep doing that, but she’s creating a bigger problem as the banks falter,” he said.

It is widely anticipated by the financial markets that the Fed will announce a rate hike of 25 basis points on Wednesday.

On the stock side, First Republic Bank posted a record daily rise, jumping 29.50% after the Wall Street Journal reported that JPMorgan’s chief executive was in talks with other banks to invest in FRB.

Tesla rose 7.80% as data on registrations in China suggest that the electric vehicle manufacturer had one of its best quarters there.

(French version Jean Terzian)