US Stocks Rally to Close Friday 03/24 16:01
A late-afternoon turnaround on Wall Street left stocks higher Friday as the
market shook off a weak start amid worries about banks on both sides of the
(AP) -- A late-afternoon turnaround on Wall Street left stocks higher Friday
as the market shook off a weak start amid worries about banks on both sides of
The S&P 500 rose 0.6% after slipping for most of the morning. The benchmark
index marked its second straight weekly gain. The Dow Jones Industrial Average
rose 0.4%, while the Nasdaq composite ended 0.3% higher.
The upbeat close to the week came as markets have been turbulent on worries
that banks are weakening under the pressure of much higher interest rates.
That's led to rising concerns about a possible recession and heavy uncertainty
about what the Federal Reserve and other central banks will do with interest
rates going forward.
"There are concerns out there about, obviously, a more severe bank crisis,
both domestically and in Europe, and yet somehow markets are looking past
that," said Randy Frederick, managing director of trading & derivatives at
On Friday, much of the focus was on Deutsche Bank, whose stock tumbled 8.5%
in Germany. Earlier this month, shares of and faith in Swiss bank Credit Suisse
fell so much that regulators brokered a takeover of it by rival UBS.
Credit Suisse faced a relatively unique set of longstanding troubles. But
the second- and third-largest U.S. bank failures in history earlier this month
have cast a harsher spotlight across the entire banking industry.
Other big European banks also fell Friday, including a 5.5% drop for
Germany's Commerzbank, a 5.3% fall for France's BNP Paribas and a 3.5% loss for
Bank stocks ended mixed on Wall Street. JPMorgan Chase fell 1.5%, while Bank
of America rose 0.6%.
In the U.S., the hunt by investors has primarily been for banks that could
face a debilitating exodus of customers, similar to what helped cause the
failures of Silicon Valley Bank and Signature Bank.
Investors have zeroed in on smaller and midsized banks, the ones below in
size of the "too-big-to-fail" banks and seen as greater risks.
First Republic Bank closed 1.4% lower. It's down 90% for the year.
Treasury Secretary Janet Yellen has said that in cases where the government
sees a risk to the overall system, it will guarantee deposits for bank
customers, even those with more than the $250,000 insured by the Federal
Deposit Insurance Corp. That's what regulators did for both Silicon Valley Bank
and Signature Bank.
But Yellen this week also stopped short of a blanket guarantee for all
depositors at all banks.
Cash-short banks were still lining up this week to borrow money from the
Fed. The Fed said Thursday that emergency lending to banks fell slightly in the
past week -- to $164 billion -- but remained high.
A big worry is that all the pressure on banks will cause a pullback in
lending to small and midsized businesses across the country. That in turn could
lead to less hiring, a weaker economy and a higher potential for a recession
that many economists already saw as likely.
While the job market has remained remarkably solid, other parts of the
economy have already begun to weaken under the weight of higher rates. On
Friday, reports on the economy came in mixed. One showed orders for
long-lasting manufactured goods were slower last month than economists expected.
A second report, though, suggested the fastest uptick in business activity
for almost a year. The preliminary report from S&P Global topped economists'
Federal Reserve Chair Jerome Powell said worries about a pullback in lending
helped push the Fed to raise rates by only a quarter of a percentage point this
week, instead of a more aggressive half point, in its campaign to battle
Higher rates can undercut inflation by slowing the entire economy, but they
raise the risk of a recession. They also hurt prices for stocks and other
investments. For Silicon Valley Bank and other banks, that meant hits to the
super-safe Treasury bonds they owned.
The Fed has raised its key overnight interest rate to a range of 4.75% to
5%, up from virtually zero at the start of last year. It's hinted it may raise
rates one more time before holding them there through the end of the year.
Traders are more skeptical, though. The rising possibility of a recession
has them betting heavily that the Fed will have to cut interest rates as soon
as this summer to release some of the pressure on banks and the economy.
"Whether or not that happens, I don't know, and obviously these things
change a lot, but I would say there's a very reasonable probability to say that
rates right now may be as high as they're going to go and we may just go
sideways for a while," Frederick said.
Such speculation has added to an increased drive by investors to pile into
anything seen as safe, which together have caused huge, sometimes violent
swings in the bond market.
On Friday, yields fell further. The 10-year yield, which helps set rates for
mortgages and other loans, fell to 3.38% from 3.42% late Thursday. It was above
4% earlier this month.
The drop has been even more dramatic for the two-year Treasury yield, which
more closely tracks expectations for the Fed. It sank to 3.77% from 3.83% late
Thursday and from more than 5% earlier this month.
All told, the S&P 500 rose 22.27 points to 3,970.99. The Dow added 132.28
points to 32,237.53. The Nasdaq gained 36.56 points to close at 11,823.96.
Small company stocks outgained the broader market. The Russell 2000 index
rose 14.63 points, or 0.9%, to 1,734.92.