Wall Street finishes higher as market eyes Fed’s policy meeting

The U.S. stock market finished higher on Tuesday as the market anticipated the conclusion of the Federal Reserve's policy meeting.

The Dow Jones Industrial Average closed at 32,560.60, gaining 316.02 points or 0.98 percent, and the S&P 500 finished above the critical 4,000-line at 4,002.87, adding 51.30 points or 1.30 percent.

Meanwhile, the tech-leaning Nasdaq Composite concluded the session at 11,860.11, rising by 184.57 points or 1.58 percent. The energy consumer discretionary and banking became the best-performing sectors in the trading session.

Shares of First Republic, a San Francisco-based regional bank, rose by 29.47 percent to $15.77 after Wall Street Journal reported that JPMorgan CEO Jamie Dimon led talks with other top banks to invest in the lender.

Analysts said First Republic was at risk of experiencing a liquidity issue due to the crisis of confidence in the banking sector. The lender already received a $30 billion rescue package from large banks last week to resolve its liquidity shortage for the short term.

First Republic peers PacWest Bancorp and Western Alliance Bancorp also surged by 18.77 percent and 14.96 percent, respectively.

Shares of Tesla also rose 7.82 percent after reports suggested that the electric carmaker was on track to achieve one of its best quarterly earnings in China.

The S&P Banks index and the KBW Regional Banking index rose by 3.6 percent and 4.8 percent, respectively, their biggest daily percentage gains since late last year. However, the former still lost 18 percent of its value in March, as of Tuesday.

The sub-index posted a significant decline over the past two weeks due to the volatility in the sector following the collapse of two regional lenders, Silicon Valley Bank (SVB) and Signature Bank.

However, the equity market has begun to recognize that the banking crisis was isolated to certain banks instead of a widespread phenomenon, as noted by analysts.

"Both the public and the private sector have shown they are more than able to backstop and shore up weak institutions," Oliver Pursche, senior vice president at investment adviser Wealthspire, said.

Treasury Secretary Janet Yellen also addressed the present issue before the American Bankers Association, assuring the public that regulators' actions to stabilize the sector had worked. However, she warned authorities might take more actions if required.

Currently, the market is eyeing the Fed's policy meeting, which will determine the rate increase. Financial services company CME reported that most investors projected a 25-basis-point hike, while a smaller percentage predicted no change in the benchmark rate.

Pursche argued that the market would not "care" about the size of the rate hike. Instead, the market will be anticipating Fed chairman Jerome Powell's remarks about the economy and inflation. According to Pursche, Powell must convince the public that the recent "banking noise" is due to bad management at certain banks.

The Fed's tight monetary policy, which leads to high interest rates, has been under scrutiny for partially causing the collapse of SVB and Signature. These banks collapsed after experiencing a shortage in cash after many of their customers, largely tech startups, withdrew their deposits to maintain business operations. The startups had trouble receiving financing because of the higher rates.

Asian, Australian stocks rally

Stock markets in Asia strengthened on Wednesday local time following the rally in the U.S. Japan's Nikkei 225 was the best performer in the region, closing 1.93 percent higher to 27,466.

The Hang Seng index in Hong Kong gained 1.76 percent as local authorities tried to assure the public that the domestic banking system was resilient. South Korean Kospi also finished 1.20 percent higher.

In Australia, the benchmark S&P/ASX 200 index closed at 7,015.6, adding 0.87 percent.