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Stocks climb as worries over banking system ease

by STAN CHOE The Associated Press | March 31, 2023 at 1:45 a.m.

Stocks rose Thursday as more fear evaporated from Wall Street, keeping its main index on track for a winning month.

The S&P 500 rose 23.02 points, or 0.6%, to 4,050.83 for its fifth gain in the past six days. The benchmark index has been on a sharp turnaround after struggling in earlier weeks on worries the banking system was cracking under the weight of higher interest rates by the Federal Reserve to lower inflation.

The Dow Jones Industrial Average rose 141.43 points, or 0.4%, to 32,859.03, and the Nasdaq composite gained 87.23 points, or 0.7%, to 12,013.47.

Forceful actions by regulators worldwide have helped build confidence that the current trouble for banks won't torpedo economies like the 2008 financial crisis. Traders have also been betting heavily the Fed will have to cut interest rates soon. Such cuts likely offer relief to markets after a year of relentless rate increases and also tend to act like steroids for markets.

To be sure, all the recent ebullience has some professionals on Wall Street wary.

"Markets are pricing the best of both worlds: a recession that brings inflation down rapidly and keeps rates low, yet one where corporate earnings do not fall sharply," according to analysts at Barclays led by Ajay Rajadhyaksha, global chairman of research.

They are skeptical and think bonds and U.S. stocks look too expensive.

Since Silicon Valley Bank earlier this month became history's second-biggest U.S. bank failure, Treasury yields in the bond market have tumbled as traders built bets the Fed will take it easier on interest rates.

The Fed has pulled its key overnight rate to a range of 4.75% to 5%, up from virtually zero at the start of last year, to drive down the fastest pace of inflation in 40 years. The bet on Wall Street has been that the Fed will cut rates to release pressure built up on the economy and banks. That has caused the price to soar and the yield to tumble for the two-year Treasury, which tends to move on expectations for Fed action.

The yield plunged from more than 5% earlier this month, when it was at its highest level since 2007, back below 3.60% last week. That's a big move for the bond market. The two-year yield rose Thursday to 4.12% from 4.11% late Wednesday.

Expectations for easier rates in turn have helped buoy tech stocks that dominate the S&P 500 and other indexes. That's because tech and high-growth stocks are seen as some of the biggest beneficiaries of low rates.

Gains for Microsoft Corp., Apple Inc. and Inc. on Thursday were the strongest forces pushing the S&P 500 higher. Amazon rose 1.7%, while the others were up more modestly.

Information for this article was contributed by Yuri Kageyama, Matt Ott and Joe McDonald of The Associated Press.

Print Headline: Stocks climb as worries over banking system ease


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