Efforts To Address Banking Turmoil Contribute To Strength On Wall Street

Following the sharp pullback seen last Friday, stocks fluctuated over the course of the trading session on Monday but largely maintained a positive bias.

The major averages all finished the day in positive territory. The Dow jumped 382.60 points or 1.2 percent to 32,244.58, the Nasdaq rose 45.02 points or 0.4 percent to 11,675.54 and the S&P 500 advanced 34.93 points or 0.9 percent to 3,951.57.

The strength on Wall Street partly reflected a positive reaction to the latest efforts to address turmoil in the banking sector, including UBS Group’s (UBS) state-backed acquisition of Credit Suisse (CS).

U.S.-listed shares of UBS jumped by 3.3 percent following the news it will acquire its troubled rival for 3 billion Swiss francs, or $3.2 billion. However, Credit Suisse plummeted by 53.0 percent.

The Federal Reserve also announced it has joined with other central banks around to world to take coordinated action to enhance the provision of liquidity via the standing U.S. dollar liquidity swap line arrangements.

The central banks currently offering U.S. dollar operations have agreed to increase the frequency of 7-day maturity operations from weekly to daily in order to improve the swap lines’ effectiveness in providing U.S. dollar funding.

Additionally, shares of New York Community Bank (NYCB) soared by 31.7 percent on news its subsidiary Flagstar Bank will acquire substantially all of Signature Bank’s deposits and certain loan portfolios as well as all 40 of its branches.

Traders were also looking ahead to the Fed’s monetary policy announcement on Wednesday, with CME Group’s FedWatch Tool currently indicating a 26.9 percent chance interest rates will remain unchanged and a 73.1 percent chance of a 25 basis point rate hike.

Sector News

Oil service stocks showed a substantial move back to the upside, with the Philadelphia Oil Service Index spiking by 3.0 percent after ending last Friday’s trading at a five-month closing low.

The rally by oil service stocks came as the price of crude oil for April delivery showed a notable recovery after seeing early weakness.

Significant strength was also visible among tobacco stocks, as reflected by the 2.3 percent surge by the NYSE Arca Tobacco Index.

Steel, chemical and natural gas stocks also saw considerable strength on the day, while software stocks showed a notable move to the downside.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Monday. Japan’s Nikkei 225 Index dove by 1.4 percent, while Hong Kong’s Hang Seng Index plunged by 2.7 percent.

Meanwhile, the major European markets moved to the upside over the course of the session. While the French CAC 40 Index surged by 1.3 percent, the German DAX Index jumped by 1.1 percent and the U.K.’s FTSE 100 Index advanced by 0.9 percent.

In the bond market, treasuries gave back ground after moving sharply higher last Friday. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 8.6 basis points to 3.481 percent.

Looking Ahead

Trading activity on Tuesday is likely to be somewhat subdued as traders await the Fed’s decision, although a report on existing home sales may attract some attention.

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