Wall Street ends in the green as inflation slows and bank jitters ease

NEW YORK (Reuters) – U.S. stocks rebounded on Tuesday as broadly targeted inflation data and easing tensions about contagion in the banking sector lowered expectations about the size of an interest rate hike at the Federal Reserve’s monetary policy meeting next week.

All three major US stock indexes closed sharply higher, with the S&P 500 and Dow up more than 1% and the heavy Nasdaq up more than 2%, after several sessions of risk aversion turbulence driven by the fallout surrounding the implosion. Silicon Valley Bank and Signature Bank.

Financial stocks recovered some losses, with the S&P 500 Banks Index (.SPXBK) coming back from the most severe one-day sell-off since June 2020.

The KBW Regional Banking Index (.KRX) rose 2.1%.

Fears of banking contagion subsided on Tuesday as US President Joe Biden and other global policymakers vowed to contain the crisis.

“The market has had a chance to digest some of the news over the past couple of days,” said Matthew Keator, managing partner at Keator Group, a wealth management firm in Lenox, Massachusetts. “(Investors) see coordinated efforts with various government agencies, and in hindsight, they feel as though things have contained themselves a bit.”

Show the Consumer Price Index report for the Labor Department Cooling consumer prices In February, largely in line with market expectations, headline and core measures posted a welcome year-on-year decline.

However, inflation has a long way to go before approaching the central bank’s average annual target of 2%.

But signs of economic weakness, along with a regional bank panic, have increased the odds that the Federal Reserve will implement a modest 25 basis point increase in its key interest rate at the close of its two-day policy meeting on March 22.

Financial markets have now priced in a 74.5% chance that the central bank will raise the Fed’s funds target rate by an additional 25 basis points at the close of its two-day monetary policy meeting later this month, with a growing minority – 25.5% – seeing the possibility of no rate hike. Not at all, according to CME’s FedWatch tool.

“Part of the stabilization today is people feeling as though the Fed may backtrack on some of the optimistic forecasts that followed Chairman Powell’s comments last week,” Kittor added.

“If the Fed is not careful, it could cause some unintended shocks to the system,” he said.

The shockwaves following the closings of Silicon Valley and Signature Bank, which prompted Biden to vow to contain the crisis and ensure the integrity of the US banking system, continue to reverberate across the sector.

The S&P 500 Banking Index (.SPXBK) retook territory, up 2.6% after Monday’s plunge, its biggest one-day decline since June 2020.

The Dow Jones Industrial Average increased 336.26 points, or 1.06%, to 32155.4 points, the Standard & Poor’s 500 increased 64.8 points, or 1.68%, to 3920.56 points, and the Nasdaq Composite Index increased 239.31 points, or. 2.14% to 11428.15.

All 11 major sectors of the S&P 500 ended the trading day higher, with Telecom Services (.SPLRCL) enjoying the largest percentage gain.

Shares of First Republic Bank (FRC.N) and Western Alliance Bancorp (WAL.N) rose 27.0% and 14.4%, respectively, reversing the previous session’s decline.

Meta Platforms Inc (META.O) announced 10,000 job cuts in its second round of layoffs. Its stock rose 7.3%.

Ride-hailing app rivals Uber Technologies Inc (UBER.N) and Lyft Inc (LYFT.O) rose 5.0% and 0.6%, respectively, after a California state court revived a ballot measure that allows companies to treat drivers as independent contractors rather than employees.

United Airlines Holdings Inc (UAL.O) fell 5.4% after the commercial carrier unexpectedly forecast a loss for the current quarter.

AMC Entertainment Holdings (AMC.N) fell 15.0% between multiple trading stops after its shareholders voted in favor of converting preferred shares into common shares.

Advance issues outnumbered declining issues on the NYSE by a ratio of 2.60 to 1; On the Nasdaq, the ratio is 1.83 to 1 in favor of advanced traders.

S&P 500 posted 3 new highs in 52 weeks and 15 new lows; The Nasdaq index posted 23 new highs and 195 new lows.

Trading volume on US stock exchanges reached 13.84 billion shares, compared to an average of 11.64 billion over the last 20 trading days.

(This story has been reworded to fix confusion in paragraph 20)

Additional reporting by Stephen Culp in New York Additional reporting by Shubham Batra and Amruta Khandekar in Bengaluru Editing by Anil D’Silva and Matthew Lewis

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