US stocks close higher as banks to inject $30bn into First Republic

New York — A strong rebound by financials helped Wall Street’s main indices close firmly positive on Thursday, after media reports said some of the country’s largest lenders were in talks to aid First Republic Bank.

The technology sector also contributed to the gains, helping to boost the Nasdaq Composite to its strongest performance since February 2 2022.

The latest twist in the regional banks saga came on the heels of a 50 basis point (bps) rate hike by the European Central Bank, which earlier in the day had dampened investor sentiment already hurt by fears of a banking crisis.

Eleven financial institutions, including JPMorgan Chase and Morgan Stanley, confirmed earlier reports they would deposit up to $30bn into First Republic Bank’s coffers to stabilise the lender, according to several reports.

“Banks are looking out for one another,” said Huntington Private Bank chief investment officer, John Augustine. “We had two outliers go down and now they want to save what is considered a more mainstream bank.”

Shares of JPMorgan and Morgan Stanley advanced, while the possibility of a rescue buoyed First Republic Bank.

The positive sentiment spread to some of the other regional lenders, with Alliance Bancorp posting strong gains.

The KBW regional banking index and the S&P 500 banking index both rebounded from negative territory to close higher.

Concerns about banks have rattled the stock market in recent days after the collapse of SVB Financial fuelled contagion fears.

Meanwhile, US treasury secretary Janet Yellen said the US banking system remains sound and Americans can feel confident that their deposits will be there when needed.

US-listed shares of Credit Suisse advanced after the bank secured a credit line of up to $54bn from the Swiss National Bank to shore up liquidity and investor confidence.

According to preliminary data, the S&P 500 gained 68.67 points, or 1.76%, to end at 3,960.60 points, while the Nasdaq Composite gained 283.85 points, or 2.48%, to 11,717.90. The Dow Jones industrial average rose 377.34 points, or 1.18%, to 32,251.91.

Data showed the number of Americans filing new claims for unemployment benefits fell more than expected last week, pointing to continued labour market strength, which could persuade the Fed to keep raising rates further.

Weak retail sales figures, as well as data showing a downward trend in producer inflation, on Wednesday had bolstered bets of a small rate hike by the Federal Reserve at its meet concluding on March 22.

Money markets are still largely pricing in a 25 bps rate hike by the Fed at its March 22 policy announcement.

Facebook parent Meta Platforms and Snapchat operator Snap  climbed after the US administration threatened to impose a ban on rival TikTok.