U.S. shares up sharply as Very first Republic will get rescue from banking companies

U.S. shares rose sharply Thursday as an arrangement by a team of large banks to deposit $30 billion with troubled financial institution First Republic Lender assisted soothe fears of a rolling banking crisis.

What is happening
  • The Dow Jones Industrial Regular
    rose 405 details, or 1.3%< to 32,280.
  • The S&P 500
    was up 72 points, or 1.9%, at 3,964.

  • The Nasdaq Composite
    advanced 293 points, or 2.6%, to 11,728.

Stocks have seen volatile trade this week amid signs of stress in the banking system, but all three major indexes are on track for weekly gains.

What’s driving markets

Worries about risk in the banking sector following the collapse of Silicon Valley Bank and two other U.S. lenders have weighed on markets over the past week, but negotiations toward a package to shore up First Republic
which was then announced late in the afternoon, helped to ameliorate worries, market analysts said.

Bank of America
 , JPMorgan Chase 
and Wells Fargo  
said Thursday they are each making $5 billion uninsured deposits as part of a $30 billion package from 11 banks into First Republic Bank. U.S. regulators praised the move.

Mark Grant, chief global strategist at Colliers Securities, said a deal would shore up confidence in the most vulnerable regional U.S. lenders.

“It’ll calm the depositors greatly and I think the big banks also see this as an opportunity to grow their franchise at an opportunistic price,” Grant told MarketWatch, in a phone interview.

Earlier, Credit Suisse Group
said it would borrow 50 billion francs ($54 billion) from the Swiss National Bank, which helped shares of the troubled Swiss lender rebound. Meanwhile, the European Central Bank’s decision to hike its policy rate by 50 basis points Thursday spurred expectations that central banks wouldn’t let worries about the banking sector distract them from taming inflation.

See: Why the ECB looked past Credit Suisse drama to deliver another supersize rate hike

“I think the fact that [the ECB] went 50 is telling you, at a bare minimum, that inflation is at this point as important as financial stability,” said Michael Lebowitz, a portfolio manager at RIA Advisors, during a call with MarketWatch.

Meanwhile, Treasury Secretary Janet Yellen on Thursday told senators that the U.S. banking system stands on solid footing, following the government’s moves last weekend to backstop depositors at two failed banks.

“I can reassure the members of the committee that our banking system is sound, and that Americans can feel confident that their deposits will be there when they need them,” Yellen said as she testified before the Senate Finance Committee.

In U.S. economic news Thursday, jobless data showed fewer than 200,000 Americans claimed benefits last week, fewer than economists polled by The Wall Street Journal had expected. The data were the latest sign that the U.S. labor market remains robust, despite rising layoffs in the technology space and other parts of the economy.

“Strong demand for workers is still being signaled by a low level of jobless claims, solid job growth and elevated job openings,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Companies in focus
  • Adobe Inc.
    shares climbed after the software company topped Wall Street expectations with its quarterly earnings released Wednesday after the bell.

  • Shares of Charles Schwab Corp.
    fell 2%, even as executives disclosed that they had scooped up nearly $7 million worth of the financial-services giant’s beaten-down stock on Tuesday and Wednesday. Schwab shares have fallen 24% so far this month.

  • Intel Corp.
    shares climbed 6% after Susquehanna analyst Christopher Rolland ended his bearish call the chip maker. Thursday, writing that “things are moving enough in the right direction.”

—Jamie Chisholm contributed to this article.

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