On Tuesday, traders tried to add to a rally from the previous session that was sparked by hope that the turmoil in the banking sector would be contained. This optimism led to a rise in stock futures.
The futures market for the Dow Jones Industrial Average rose 237 points, which is equivalent to a 0.7% gain. Futures on the S&P 500 increased by 0.7%, while futures on the Nasdaq-100 rose by 0.4%.
Early trading saw a rise in the price of regional banks, led by First Republic. A day after suffering a loss of 47%, the battered bank saw its value increase by 21.9%. The performance of the SPDR Regional Banking ETF (KRE) increased by 3%. After it was reported by Bloomberg News that the United States government is looking into ways to temporarily expand the coverage provided by the Federal Deposit Insurance Co. to include all deposits, regionals received a boost.
The Dow Jones Industrial Average increased by more than 380 points on Monday, while the S&P 500 posted a gain of 0.9%. Wall Street just finished a strong rally. The move came one day after a takeover of Credit Suisse by UBS that was engineered by the Swiss government. UBS was forced to take over Credit Suisse. The news that JPMorgan Chase could be advising First Republic Bank, which is currently in trouble, on strategic alternatives was also well received by investors.
Some industry professionals are of the opinion that the market for selling banks appears to be saturated, and that it will take the appearance of new deposit problems at a different name in order to bring out incremental supply. Despite this, there is very little interest from outside parties to step in and buy the group, particularly the regionals.
In light of the ongoing banking crisis, investors are currently anticipating a more gradual pace of tightening from the Federal Reserve. According to the FedWatch tool developed by CME Group, traders currently have priced in a probability of 83% that the Fed will raise interest rates by a quarter point when it concludes its two-day policy meeting on Wednesday. There is a one in five chance that there will be a pause.
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