First Republic, regional banks boost Dow ahead of the week's opening

Markets increased on Monday, adding to the gains made the previous week, as investors tried to put the regional bank crisis that started earlier this month after Silicon Valley Bank's failure behind them.

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By 207 points, or 0.7%, the Dow Jones Industrial Average increased. The Nasdaq Composite increased by 0.5% and the S&P 500 increased by 0.6%.

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The SPDR S&P Regional Banking ETF (KRE) increased by more than 3% as regional banks generally increased. First Republic, which increased by more than 27%, was the fund's best-performing stock. PacWest likewise saw a rise of almost 6%.

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According to Craig Erlam, senior industry analyst at Oanda, "the authorities were once more busy over the weekend attempting to clean up the mess of the prior several weeks." "What matters is that the institutional factors in the US and Europe continue to demonstrate the ability to deal with the repercussions from the current turmoil quickly and effectively in order to control it before it gets worse. One aspect of that is restoring the markets' previously shattered confidence.

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Events in the sector were favorable at the time. Over the weekend, Trade Algo reported a slowdown in the deposit outflows of small banks to major players in the market like JPMorgan Chase and Wells Fargo.

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Also, according to Trade Algo, American regulators are thinking about expanding a program for emergency bank loans, which could allow First Republic additional time to strengthen its liquidity. Investors questioned whether the pledge from a consortium of banks to deposit $30 billion would be sufficient to strengthen First Republic's balance sheet as the stock ended the previous week down 46.3%.

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Moreover, First Citizens BancShares concurred to acquire significant portions of Silicon Valley Bank, a U.S. Overnight, the Federal Deposit Insurance Corporation reported. Although roughly $90 billion in securities and other assets would remain "under receivership for disposition by the FDIC," the agreement involves the purchase of approximately $72 billion in SVB assets at a discount of $16.5 billion.

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Jan Hatzius of Goldman Sachs wrote in a letter on Monday, "We continue to anticipate that the Treasury has the potential to offer a guarantee for uninsured deposits if it becomes necessary." Although we wouldn't completely rule out Treasury involvement if acute banking stress reappears, the chances of a unilateral action from of the Treasury look to be quite slim.

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Moreover, Deutsche Bank recovered by 4% after being hit by speculators last week as a result of Credit Suisse's forcible takeover.

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In their remarks throughout the course of the week, Fed Chair Jerome Powell and Treasury Secretary Janet Yellen sought to reassure investors that the U.S. banking system was secure and supported.

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Notwithstanding turbulence brought on by the Federal Reserve's most recent hike in interest rates and the continuing bank crisis, Wall Street had a profitable week. With a 1.7% gain, the Nasdaq led the way higher among the major indices. The Dow gained 1.2% and the S&P gained 1.4% for the week.

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Despite the recent upheaval, the S&P 500 is expected to close March flat and the first quarter with a 3% gain on Friday.

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