U.S. stocks ended mixed on Monday as the Federal Deposit Insurance Corporation announced that North Carolina-based First Citizens Bank would take on the deposits and loans of the defunct regional lender Silicon Valley Bank.
The Dow Jones Industrial Average finished at 32,432.08, rising by 194.55 points or 0.60 percent. The S&P 500 concluded the trading session at 3,977.53, gaining 6.54 points or 0.16 percent. The S&P 500 last broke the critical 4,000 level on March 6. The tech-leaning Nasdaq Composite was the only major Wall Street index that closed lower at 11,768.84 after losing 55.12 points or 0.47 percent.
The banking sector performed better on Monday, with the S&P 500 bank index closing three percent higher. Last Friday, the sub-index posted a 22 percent month-to-date loss. Analysts said the recent acquisition of SVB had improved the market's confidence in the sector.
"The main driver to [Monday's] sentiment has been the banking news over the weekend," Michael James, managing director of equity trading at wealth manager Wedbush Securities, said.
First Citizens agreed to acquire SVB's loans at a discounted price, a process facilitated by the FDIC. The lender also received a significant portion of SVB's total assets and customer deposits as a part of the deal. First Citizens executives released a statement regarding the acquisition, saying the bank aims to win back SVB customers who had withdrawn their money.
In addition to the SVB acquisition, James said the potential expansion of the Federal Reserve's emergency lending program also contributed to the rally in the banking sector. After the collapse of SVB and fellow regional lender Signature Bank, the Fed established a lending program that would allow banks to resolve short-term liquidity issues.
Sources reported that the central bank was motivated to expand the program as several banks, including San Francisco-based First Republic Bank, still had an issue with improving their balance sheets.
Regardless, James warned that the new developments in the banking system did not completely dispel the market's concerns about the sector. He said the market still did not know the full effect of higher interest rates on the global economy.
The Wedbush executive also pointed out how rate-sensitive sectors, including technology, closed lower on Monday. James said it showed the increased probability of the Fed having another interest rate hike in May. The Fed raised the rate by 25 basis points last week, bringing it to the range of 4.75 to 5.00 percent.
Fed officials have signaled that the central bank will soon pause the hike but did not offer the exact plan of when the pause would happen.
Dollar index falls
The dollar index, which tracks the currency's performance against other major currencies, fell by 0.155 percent on Monday. Analysts explained that it showed investors were still hesitant to put more funds into the financial market due to remaining concerns about the banking sector.
The euro rose by 0.36 percent to $1.0798, while the sterling increased by 0.47 percent to $1.2286. The Canadian dollar also outperformed the dollar by 0.66 percent. The Mexican peso strengthened against the greenback by 0.54 percent at 18.34 per U.S. dollar.
On the other hand, the Japanese yen weakened by 0.64 percent versus the U.S. dollar at 131.56.
Commodities update
Oil prices rallied Monday as Iraq had to halt some crude exports from its Kurdistan region. Brent finished 4.17 percent higher at $78.12 a barrel. The U.S. crude prices rose by 5.13 percent to $72.81.
Gold prices fell as investors redirected their funds back to riskier assets like equities. Spot gold fell by one percent to $1,957.22 an ounce, while U.S. gold futures dropped by 1.28 percent to $1,956.80.