UBS - S&P 500 Dow Nasdaq rise as bank fears ease

2023-03-20 16:07:43 ET

U.S. stocks finished higher on Monday, as bank stocks advanced amid hope that the turmoil in the sector might be dying down. Meanwhile, investors looked ahead to a key Federal Reserve decision due out later in the week.

The Nasdaq Composite ( COMP.IND ) closed +0.4% , the S&P 500 ( SP500 ) finished +0.9% and the Dow ( DJI ) ended +1.2% .

Banks remained in the spotlight amid a rush of headlines. Swiss authorities helped broker a deal for UBS ( UBS ) to take over troubled rival Credit Suisse ( CS ). Meanwhile, New York Community Bancorp ( NYCB ) agreed to take over shuttered Signature Bank's ( SBNY ) deposits and some of its loans.

"The banking sector has settled for now. That could change overnight, but as of this afternoon, traders' eyes will carefully turn to the Fed decision on Wednesday and its dot plot," Mike Zaccardi told Seeking Alpha. "This will be a pivotal meeting in light of the domestic regional banking saga and with global financial institutions reeling from the Credit Suisse take-under, which was reminiscent of Bear Stearns which occurred almost 15 years ago to the day."

Zaccardi added: "I'll be keeping my eye on interest rate volatility - the ICE BofA MOVE Index hit its highest reading since late 2008 last Thursday - if that can cool, confidence will be restored and stocks can rally."

Looking ahead to the Fed's upcoming interest rate decision, due out on Wednesday, consensus has been solidifying in recent days around the expectation of a 25-basis-point hike. The CME's FedWatch tool now estimates the perceived probability of a quarter-point increase at 73%. The market is pricing in a 27% likelihood that the central bank will halt its rate hikes entirely.

Treasury yields climbed following the sharp declines seen last week. The U.S. 10-year Treasury yield ( US10Y ) advanced 9 basis points to 3.49% and the 2-year U.S Treasury yield ( US2Y ) climbed 10 basis points to 3.94%.

Looking outside the financial sector, Pinduoduo ( PDD ) posted a significant decline, weighed down by disappointing financial figures .

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