(Reuters) – The New York Stock Exchange opened in disarray on Monday as markets struggled to find direction after rival UBS announced a takeover of Credit Suisse and as the Fed could curb rate hikes on Wednesday amid fears about the banking system.
In early trading, the Dow Jones index gained 91.82 points, or 0.29%, to 31,953.80 points and the broader Standard & Poor’s 500 rose 0.16% to 3,922.74 points.
The Nasdaq Composite lost 0.10%, or 11.55 points, to 11,618.96.
The New York Stock Exchange enters a key week for US monetary policy, with the Federal Reserve (Fed) meeting scheduled for Wednesday, and all eyes on a possible status quo on interest rates as several US banks were trapped by the accelerated rise in borrowing costs to curb inflation.
Initially focused on US regional players Silicon Valley Bank and Signature Bank, worries about the banking sector spread last week to Europe after the giant Credit Suisse failed to win the support of its largest shareholder, dragging European banks down with it.
To avoid further turbulence, UBS agreed on Sunday to buy the Zurich-based bank for 3.04 billion euros, but investor concerns persist and the stock faces another tough session on Monday.
The expected losses for Credit Suisse bondholders in the deal with UBS further alarmed investors.
“The market has digested the forced marriage between UBS and Credit Suisse. Systemic risks are a little more downplayed (and) everyone is looking forward to what the Fed is going to do,” said Matt Orton, chief market strategist at Raymond James Investment Management.
According to CME’s FedWatch Barometer, traders are torn between the likelihood of a quarter-point rate hike and a status quo by the Fed on Wednesday.
The turmoil in the banking sector has some investors turning to digital assets, which helped bitcoin hit a nine-month high on Monday.
Credit Suisse’s New York-listed stock shed 50.7% as its merger with UBS sparked concerns among investors about the stability of the banking system.
Troubled regional bank First Republic Bank fell 17.4% after S&P Global downgraded its credit rating to junk, while adding that the recent injection of $30 billion in deposits by 11 major banks may not solve its liquidity problems.
Big US banks JP Morgan, Citigroup and Bank of America, banks involved in the unprecedented support for First Republic Bank, gained between 0.6% and 1.2%.
PacWest Bancorp’s stock, however, rose 19.6% as its Pacific Western Bank division said deposit movements had stabilized since last Monday.
Helped by the rise in bitcoin, Riot Blockchain and Marathon Digital are up 3.9% and 1.5% respectively.
(Written by Diana Mandiá, Editing by Kate Entringer)
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