What started out as a seemingly difficult day for Wall Street has now shifted directions. When markets first opened today, they plunged on news that the European Central Bank (ECB) had hiked interest rates by a half percentage point.
That move surprised some experts following the tensions that have rocked the banking world since last week. While the hike indicates that the ECB is not backing down from its fight against inflation, though, it wasn’t enough to keep markets down today.
Since this morning, both the Dow Jones Industrial Average and the S&P 500 have pulled into the green and are rising steadily, pushing many stocks up. Why? The reason can be traced back to some positive news from the banking sector.
Here’s what investors should know moving forward.
What’s Pushing Stocks Up Today
Since last week’s collapse of SVB Financial’s (NASDAQ:SIVB) principal subsidiary, Silicon Valley Bank, banks have been struggling to regain investor confidence. It didn’t help when Credit Suisse (NYSE:CS) lost a large source of funding either, casting further doubt over the sector. However, the global investment bank announced this morning that it has since obtained a hefty line of credit from Switzerland’s central bank. Described as a “bazooka,” this cash influx should help stabilize CS stock in the short term, helping push other stocks up as market momentum shifts.
The banking sector is by no means out of the woods. But while Credit Suisse investors breathe a sigh of relief, another bank also has some good news to report.
First Republic Bank (NYSE:FRC) has been falling since the SVB meltdown and there has been speculation that it could be among the next banks to fall. However, FRC may be about to receive a lifeline. The Wall Street Journal reports that several Wall Street institutions, including JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS), are “in rescue talks.”
It will likely take more time for investors to start feeling confident in bank stocks again. But days like this should serve as an indication that markets are slowly shifting back in favor of the sector, even as monetary policy decisions threaten to derail its progress.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
