Market Snapshot: Dow rises around 350 points as investors assess bank risks ahead of Fed’s next rate decision

by | Mar 20, 2023 | Stock Market

U.S. stocks resumed their rally in Monday afternoon trading as investors looked favorably upon the latest efforts to stave off a global banking crisis ahead of this week’s Federal Reserve interest-rate decision.What’s happening
The Dow Jones Industrial Average
rose 366 points, or 1.2%, to 32,228.

The S&P 500 index
gained 32 points, or 0.8%, to 3,949.

The Nasdaq Composite
rose 27 points, or 0.2%, to 11,657 after toggling between gains and losses.

The S&P 500 and Nasdaq Composite both gained ground last week despite the continued banking upheaval, while the Dow suffered a second straight weekly loss.

What’s driving markets UBS Group’s
purchase of its beleaguered Swiss peer Credit Suisse
a deal forced by the country’s regulators and finalized late Sunday in a bid to stave off a further deterioration in confidence in the global banking system, appeared to get a favorable reception from investors. “Some of the news over the weekend cleared the deck of concerns over Credit Suisse falling into an abyss or having to be rescued by the government,” said James Demmert, chief investment officer at Main Street Research, a New York City-based firm with $2 billion in assets under management. And while upheaval in the banking sector isn’t welcome, it is a sign that the Fed’s year-long tightening of monetary policy is beginning to significantly squeeze financial conditions, which could be an important turning point in the battle to bring down inflation, Demmert told MarketWatch in a phone interview. The Fed, meanwhile, faces a dilemma at its policy meeting on Tuesday and Wednesday as it tries to balance its inflation fight against worries over the stability of the financial system. Read: The Fed will either pause or hike interest rates by 25 basis points. What are the pros and cons of each approach? Fed-funds futures traders, who earlier this month had braced for a rate hike of 50 basis points, or half a percentage point, now see a 24% chance that policy makers will leave rates unchanged on Wednesday and a 76% chance of a 25-basis-point, or quarter-point, increase. See: Traders see growing chance of Fed rate hike in May, pause or cuts thereafter “The Fed is between a rock and hard place when it comes to trying to bring down inflation by hiking rates and not putting undue pressure on the banking system,” Gennadiy Goldberg, senior U.S. rates strategist at TD Securities, said by phone. “I think they try to break both into two separate categories, by gradually hiking rates while offering support to the banking system through its new lending program.” Also read: What’s at stake for stocks, bonds as Federal Reserve weighs bank chaos …

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