The Dow Jones Industrial Average rose Monday, building on last week's gains, as investors attempted to move on from the crisis that broke out in the regional bank sector earlier this month following the collapse of Silicon Valley Bank.
The blue-chip stock index gained 194.55 points, or 0.6%, to end at 32,432.08. The S&P 500 was up 0.2% to 3,977.53. The Nasdaq Composite finished lower by 0.5% at 11,768.84.
Regional banks rose broadly. The SPDR S&P Regional Banking ETF (KRE) rose about 0.9%, after climbing more than 3% earlier in the day. First Republic surged 11.8%. PacWest also gained 3.4%.
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"Market sentiment is improving as policymakers take steps to alleviate the recent challenges," said Brian Levitt, global market strategist at Invesco. "An extension of the liquidity facility that had been set up by the Federal Reserve meaningfully eases prior concerns that a series of bank runs could be in the offing."
A series of events helped sentiment in the sector. CNBC reported over the weekend that the deposit outflows from small banks to industry giants like JPMorgan Chase and Wells Fargo has slowed in recent days.
Also, Bloomberg News reported that U.S. authorities were considering expanding an emergency lending program for banks, which could give First Republic more time to shore up its liquidity. First Republic ended last week down 46.3% as investors contemplated whether the plan from a group of banks to deposit $30 billion would be enough to bolster its balance sheet.
And First Citizens BancShares agreed to buy large parts of Silicon Valley Bank, the U.S. Federal Deposit Insurance Corporation said overnight. The deal includes the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billion, but around $90 billion in securities and other assets will remain "in receivership for disposition by the FDIC," which is the acronym for the Federal Deposit Insurance Corporation.
"We continue to think that the Treasury has the capacity to provide a backstop for uninsured deposits if it becomes necessary," Goldman Sachs' Jan Hatzius said in a Monday note. "While we would not entirely rule out Treasury action if acute banking stress returns, the odds of a unilateral move from the Treasury appear very low."
Deutsche Bank also rebounded by 4.7% after traders last week targeted the German lender following the forced takeover of Credit Suisse.
But technology shares fell as an increase in interest rates dampened hopes of a better outlook for growth stocks. Alphabet slid 2.8%, while Meta slipped 1.5%.
Wall Street was coming off a winning week despite volatility related to the Federal Reserve's latest interest rate hike and the ongoing bank crisis. Despite the recent turmoil, the S&P 500 is on track to finish March flat and the first quarter ending on Friday with an increase of more than 3%.
Correction: An earlier headline on this article misstated the move in the Dow Jones Industrial Average.
Dow and S&P close higher, Nasdaq falls
The Dow Jones Industrial Average gained 194.55 points Monday, or 0.6%, to end the day at 32,432.08. The S&P 500 rose 0.2% to 3,977.53. The Nasdaq Composite finished lower by 0.5% at 11,768.84 .
— Tanaya Macheel
Fed will have to 'capitulate,' Gundlach says
Don't be surprised if we see capitulation from the Federal Reserve in the near future, according to DoubleLine Capital CEO Jeffrey Gundlach.
"I don't think they're very braggadocios about, or highly confident in what was the dot plot out there and that still remains the dot plot out in 2024," he told CNBC's "Closing Bell: Overtime" on Monday. "I think they're gonna have to capitulate."
He added that over the coming weeks economic data should continue to weaken, and that it's "very logical" to infer that the economy should continue to deteriorate.
— Samantha Subin
Food stocks stand out among Monday 52-week highs. Hershey at another record
Four of the six S&P 500 stocks trading at 52-week highs Monday are also selling for all-time record prices:
- Darden, highest since Jan. 2022
- Hershey, all-time high (up 8% in 2023 after rising 20% in 2022)
- Mondelez, all-time high (up 4% in 2023 and hasn't fallen annually since 2018)
- Regeneron Pharma, all-time high going back to 1991 IPO
- Copart, highest since Jan. 2022
- Motorola Solutions, all-time high going back to Motorola Mobility split
Other notable 52-week highs outside the S&P 500:
- Pinterest, highest since Feb. 2022
- Deckers Outdoor, highest since Dec. 2021
- Oak Street Health, highest since Nov. 2021
- Signify Health, highest since July 2021; CVS expects to close the deal Wednesday
Among Monday's notable 52-week lows:
- WeWork, all-time low back to Oct. 2021 SPAC merger
— Scott Schnipper, Christopher Hayes
S&P 500 is up against heavy resistance at 4,100, says Truist's Lerner
Truist's Keith Lerner is in the camp of economists and analysts that say a recession is in sight in 2023.
Recessions risks are "elevated" this year, he said in a note Monday, adding that there's resistance around the 4,100-4,200 level for the S&P 500. The broad market index closed at 3,970 Friday.
"Although some investors may look at the strength seen in some of the popular market indices as a positive sign, weakness is evident below the surface, and macro risks are growing," he said. "Investors are not being adequately compensated for above-average macro risks, as both stocks and high yield corporate bonds trade near average valuations. This serves to reinforce our current defensive posture."
— Tanaya Macheel
KeyCorp rises after Citi says investors maybe overlooking metric of bank health
KeyCorp gained nearly 5% after Citi upgraded the stock and said investors were missing a key metric for determining the health of banks.
Analyst Keith Horowitz upgraded the stock to buy from neutral. His price target of $20 implies the stock has an upside of 68.6% from where it closed Friday.
Horowitz said investors should look at the average size of deposits over $250,000 — which is the limit insured by the Federal Deposit Insurance Corporation — rather than the share of deposits over the limit. By that measurement, he said KeyCorp is clearly different than closed Silicon Valley Bank and Signature Bank.
CNBC Pro subscribers can click here to read more.
— Alex Harring
Stocks making the biggest midday moves
Here are some of the names making the biggest moves in midday trading:
- Coinbase Global — Shares fell nearly 10% after the Commodity Futures and Trading Commission filed a complaint against crypto exchange operator Binance.
- Roku — The media platform's stock gained more than 4% after Susquehanna upgraded it to positive from neutral.
- Marqeta — Shares of the payment company jumped about 10% after it wad upgraded to outperform from peer perform by Wolfe Research.
To see more stock making moves in midday trading, read the full story here.
— Michelle Fox
Disney begins layoffs
Disney will begin the first of three rounds of layoffs this week, according to a memo from CEO Bob Iger.
The three rounds of cuts will take place before the beginning of the summer and affect about 7,000 jobs, Iger said. Layoffs had been previously announced as part of Disney's broader cost-cutting plan.
Shares of Disney were up about 1% in midday trading.
Read Iger's full memo here.
— Jesse Pound
Pinterest advances 3% following UBS upgrade
Pinterest gained 3.3% after UBS got off the sidelines on the social media platform.
Analyst Lloyd Walmsley upgraded the stock to buy from neutral, citing plans to improve advertising under new leadership. Walmsley raised his price target by $8 to $35. That implies an upside of 27.4% from where the stock closed Friday.
"Advertisers tell us Pinterest is taking bolder steps and moving more rapidly under its new CEO, Bill Ready, which gives us more confidence in the likelihood of execution overall," Walmsley said in a Sunday note to clients.
CNBC Pro subscribers can read the full story here.
— Alex Harring
Federal Reserve has already beaten inflation, according to UPenn Wharton professor Jeremy Siegel
The Federal Reserve's reluctance to cut interest rates this year is a mistake, according to Wharton School Professor Jeremy Siegel.
Fed Chair Jerome Powell announced during his press conference last Wednesday that despite tightening lending conditions from the banking sector crisis, "rate cuts are not in our base case." The comments came after the central bank raised its benchmark rate another 25 basis points, the ninth hike over the past year or so.
Siegel said that Powell's refusal to reverse course is "overkill," adding that the central bank "basically beat inflation late last year." Siegel cited falling prices for commodities, housing and other sectors.
CNBC Pro subscribers can read the full story here.
— Hakyung Kim
April natural gas falls to lowest in almost five weeks
April natural gas contracts fell as low as $2.101 per million BTUs Monday, the lowest since Feb. 23 when natural gas reached $2.095.
So far in March, natural gas is off by 23% and on pace for its third down month in four. It's almost 53% lower in the first quarter to date, on track for its worst quarter since the contract began in 1990.
First Trust Natural Gas ETF is down 13.7% in the first quarter, which would be its worst quarter since Q3 of 2020.
Individual stocks in the ETF getting hit hard this quarter include Tellurian, down about 38% and on pace for its fourth straight quarterly decline; Ovintiv, off by more than 32%; and Antero, lower by about 30%.
— Scott Schnipper, Gina Francolla
Mike Wilson says an earnings-driven stock decline is imminent
Investors are still too optimistic about corporate earnings, and a severe deterioration is about to drag stocks lower, according to Mike Wilson, Morgan Stanley's chief investment officer.
"Given the events of the past few weeks, we think guidance is looking more and more unrealistic, and equity markets are at greater risk of pricing in much lower estimates ahead of any hard data changes," Wilson said in a Monday note.
The widely-followed strategist has been one of the biggest bears on Wall Street over the past year, and he's been warning recently about high valuations that are hard to justify based on the outlook for earnings.
— Yun Li
Tech sector valuation up more than 30% from October's lows
Technology stocks have been on a tear in recent months as investors flock back into the sector — and so has the valuation for the broader group.
Since October's lows, the forward price-to-earnings multiple for the S&P 500's information technology sector is up more than 30%, noted Charles Schwab's Liz Ann Sonders in a tweet Monday. It's up from about 19 times to nearly 25 times, with the sector gaining 17.5% since the start of 2023.
Even with this gain, technology still sits below its post-Covid PE highs. The P/E ratio for the S&P 500 currently sits at about 18 times on a forward basis.
— Samantha Subin
Stocks open higher to start the week
All of the major averages rose to start the final week of the trading month.
The Dow Jones Industrial Average gained 252 points, or 0.78%. The S&P 500 was up 0.61%, while the Nasdaq Composite advanced 0.42%.
— Tanaya Macheel
Discount of SVB sale will hit bank earnings, Mike Mayo says
The sale of Silicon Valley Bank will likely take a bite out of the earnings of other banks in the coming years, according to Wells Fargo analyst Mike Mayo.
First Citizens BancShares bought SVB at a discount of $16.5 billion, meaning that the Federal Deposit Insurance Corp. will be forced to eat some of the cost. May estimated on "Squawk Box" that the discount will lead to banks losing 3% of their earnings over 3 years due to higher FDIC assessments. The FDIC's deposit insurance is funded by fees paid by banks.
"Not a big price to pay, relative to the market cap destruction," Mayo said.
— Jesse Pound
El-Erian says banking crisis probably won't lead to a recession
The U.S. is probably not heading to a recession, despite the recent banking scare, economist Mohamed El-Erian said Monday.
"I don't see any reason why we need to have negative GDP, other than a policy mistake," the chief economic advisor for Allianz told CNBC's "Squawk Box." "This economy is so resilient. It has proven to be so, and it has disappointed everybody who has called for a recession."
El-Erian has been critical of the Fed for its failure to act sooner to stem inflation, and he has called for aggressive rate hikes. However, he said that "least bad" option for the Fed now is a pause in rate increases.
"It will all depend on the Fed, whether the Fed can strike that balance that has eluded it because it mischaracterized inflation as transitory," he said. "But there is no reason for us to go into recession."
Nevertheless, El-Erian said banks have a "bumpy" road ahead as the industry braces for more regulation. That will come even though he said the current crisis is "a failure of supervision more than it is a failure of regulation."
Stocks making the biggest moves premarket
Check out the companies making headlines before the bell on Monday:
- Pinterest — Pinterest gained 4.3% after UBS upgraded the social media stock to buy and said shares could pop more than 25% as the company improves its advertising strategy.
- First Citizens BancShares — Shares popped 40% on news that First Citizens will buy around $72 billion of Silicon Valley Bank assets at a discount of $16.5 billion.
- Caterpillar — Shares dropped 1.2% after Baird downgraded the machinery company to underperform, citing potential headwinds driven by a "meaningful slowdown" in new small- and medium-sized nonresidential projects in 2024 due to ongoing turmoil with regional bank lenders.
Read here to see which other companies are making moves before the open.
— Pia Singh
Alibaba shares rise after Jack Ma reportedly returns to China
Jack Ma, the billionaire co-founder of Chinese e-commerce giant Alibaba, returned to China after roughly one year away, according to a Wall Street Journal report citing people familiar with the matter.
Ma, who was largely gone from public life after altercations with Chinese regulators, was the subject of speculation following his disappearance. According to the report, Ma spent most of the past year in Japan before recently returning to China. He was also recently in Hong Kong, Singapore and Australia.
Alibaba shares were up 0.5% in Monday premarket trading.
— Sarah Min
Elliott Management ditches plans to nominate directors to Salesforce board
Elliott Investment Management is ditching its plans to nominate directors to Salesforce's board as the software company cuts costs and improves its profit margins.
"In light of the Company's previously announced "New Day" multi-year profitable growth framework, strong fiscal year 2023 results, fiscal year 2024 transformation initiatives, Board and management actions and clear focus on value creation, Elliott decided not to proceed with director nominations, and Salesforce and Elliott have committed to continue the productive working relationship they have developed together," the activist investor and Salesforce said in a joint statement Monday.
CNBC first reported earlier this month that Elliott had reportedly nominated a slate of directors to the board.
— Samantha Subin
Regulators considering more support to help First Republic
In an effort to give First Republic Bank more time to get its finances in order, U.S. regulators are considering expanding an emergency lending facility, Bloomberg reported over the weekend.
The move would apply to all banks but especially could aid First Republic, which has had problems with assets similar to those that toppled three other regional banks. First Republic has remained open but concerns have grown over its operations and its stock has plunged.
Discussions are in an earl stage over expanding the Bank Term Funding Program, and any expansion would apply to all banks.
First Republic shares soared more than 28% in premarket trading Monday. The stock is down nearly 90% over the past month.
Deutsche Bank climbs after last week's steep losses
U.S.-listed shares of Deutsche Bank were higher in premarket trading on Monday. The stock added 3.6% before the opening bell after declining 3.1% on Friday.
Citi maintained its buy rating on the stock, despite continuing worries toward the health and stability of the overall banking sector. German Chancellor Olaf Scholz largely dismissed concerns that Deutsche could be subject to fallout similar to Credit Suisse, saying that the firm is still "very profitable" and "fundamentally modernized."
Still, Deutsche stock is still under pressure as investors weigh whether a true end is in sight contagion in the banking sector. Shares are down nearly 19% year to date.
— Brian Evans
JPMorgan traders think the market is setting up for another rally that should 'most likely' be faded
Traders at JPMorgan think the market is setting up for another rally. However, they don't expect it to last long.
"The events surrounding the banking crisis as consolidating views around the end of the tightening cycle. While inflation is not yet "cured", growth remains robust, and we may have seen the de facto end of QT," they wrote in a Monday note.
However, "at this time a sustained rally seems difficult to come to fruition. ... Longer-term, to achieve a rally, we need inflation materially lower (say 3.5% or less), earnings to accelerate higher, and you need the banking crisis solved."
— Fred Imbert, Michael Bloom
Europe stocks open higher
European stocks rose in early trade, and were up 1% by 8:30 a.m. London time with all sectors in the green.
Banks climbed 1.7% to lead gains amid cautious optimism around the sector as construction stocks climbed by 1.1% and insurance by 1.14%.
France's CAC 40, which has brushed off political volatility at home as strikes over pension reforms rock the country, was up 1%. Germany's DAX rose 0.9%, while the U.K.'s FTSE 100 was up 0.77%.
— Jenni Reid
First Citizens to buy parts of Silicon Valley Bank
First Citizens Bank agreed to buy Silicon Valley Bank's deposits and loans, the U.S. Federal Deposit Insurance Corporation announced early Monday.
"The 17 former branches of Silicon Valley Bridge Bank, National Association, will open as First–Citizens Bank & Trust Company on Monday, March 27, 2023," the FDIC said in the release.
"Customers of Silicon Valley Bridge Bank, National Association, should continue to use their current branch until they receive notice from First–Citizens Bank & Trust Company that systems conversions have been completed to allow full–service banking at all of its other branch locations."
— Elliot Smith
Deposit drain from small banks has slowed, sources say
Movement of deposits from small banks to giants like JPMorgan Chase and Wells Fargo has slowed in recent days, sources told CNBC.
Customers have grown increasingly skittish following the closure of Silicon Valley Bank, which ignited a crisis in the bank sector. While the crisis has pushed some to move their deposits to bigger banks that they see as less likely to be subject to a bank run, that trend has slowed over recent days, according to sources familiar.
That gives regulators time to address strains in the U.S. banking system as investors and customers alike wonder if contagion could spread.
— Hugh Son
Major indexes, bank shares come off winning week
Despite choppy trading as investors weighed the last interest rate hike and the fate of banks, the major indexes and U.S. bank shares finished the week in the green.
The Nasdaq Composite ended the week up 1.7%, leading the major indexes higher as investors bet an end to interest rate hikes in the near future could be good news for growth stocks. The S&P 500 followed with a 1.4% gain, while the Dow added 1.2%.
U.S. bank shares, which have been closely watched since the industry crisis began earlier this month, also saw a winning week.
Despite First Republic Bank's more than 45% plunge last week, the SPDR S&P Regional Banking ETF (KRE) was still able to post a 0.2% advance for the week. The SPDR S&P Bank ETF (KBE), meanwhile, finished the week 0.4% higher.
But despite last week's gains, both are still down more than 25% since the start of March.
— Alex Harring
Stock futures are higher
Stock futures were higher as extended trading began.
Dow futures were up 0.1% shortly after 6 p.m. ET. S&P 500 futures and Nasdaq-100 futures each added 0.2%.
— Alex Harring