May 1 (Reuters) – The S&P 500 and Dow rose as JPMorgan shares rose after the bank said it would buy most of First Republic’s assets, while investors refrained from making big bets ahead of the Federal Reserve’s monetary policy decision this week. .
Shares of JPMorgan Chase & Co (JPM.N) rose 2.8% Monday, to the highest level in nearly two months, after the deal was announced earlier in the day. The S&P 500 Banks Index (.SPXBK) rose 1.4%.
Shares of regional banks PNC Financial (PNC.N) and Citizens Financial (CFG.N) fell 4.5% and 6.1%, respectively. Major banks such as Bank of America (BAC.N) and Wells Fargo & Co (WFC.N) rose 0.3% and 2.8%, respectively.
The KBW Regional Banking Index (.KRX) declined 0.6%.
The rescue comes less than two months after a flight of deposits from US lenders Silicon Valley Bank and Signature Bank forced the Federal Reserve to intervene with emergency measures to stabilize the markets.
“When you have the largest and probably the most successful bank buying First Republic Bank’s assets, it shows some confidence in the system and a willingness on the part of the government to allow very large players to help stabilize the situation,” said Rick Mickler. Partner at Cherry Lane Investments.
First Republic’s woes started last week on a bleak note, but upbeat earnings from Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O) and Meta Platforms Inc (META.O) helped the S&P 500 (.SPX) rally. Its gains for the second consecutive month on Friday.
Analysts now expect first-quarter earnings for S&P 500 companies to fall 1.9% from a year earlier, compared with an expected 5.1% decline at the start of April, according to Refinitiv data. Apple Inc (AAPL.O) is due to file a report later this week.
Investors are eagerly awaiting the conclusion of the Federal Reserve’s two-day monetary policy meeting on Wednesday, looking for signs that its aggressive monetary tightening is about to end soon.
Recent economic data has boosted bets for a 25 basis point rate hike, with investors pricing in a 90% chance of such a move, according to CME Group’s FedWatch tool.
Investors will also focus on Jerome Powell’s press conference to assess whether the Fed’s comment has prompted market expectations of a rate cut before the end of the year amid recent banking turmoil and threats of an imminent recession.
At 10:08 a.m. ET, the Dow Jones Industrial Average was up 40.97 points, or 0.12%, at 34,139.13, the S&P 500 (.SPX) was up 1.68 points, or 0.04%, at 4,171.16, and the Nasdaq. The Composite Index (.IXIC) fell 16.65 points, or 0.14%, to 12,209.94 points.
Data on Monday showed that US manufacturing fell from a three-year low in April as new orders improved slightly and hiring rebounded, but activity remained subdued amid rising borrowing costs and tight credit, raising the risk of a recession this year.
Another batch of data showed construction spending in the US increased more than expected in March.
Norwegian Cruise Line Holdings (NCLH.N) rose 4.8% after it raised its full-year profit forecast, betting on rising prices and pent-up demand from wealthy clients.
General Motors (GM.N) gained 3.2 percent after reports that Morgan Stanley had moved the stock to “overweight.”
Advance issues outnumber losers 1.32 to 1 on the NYSE and 1.27 to 1 on the Nasdaq.
The S&P posted 21 new highs in 52 weeks without a new low, while the Nasdaq posted 48 new highs and 47 new lows.
Reporting by Anika Biswas in Bengaluru; Edited by Shounak Dasgupta
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