US stocks closed higher on Friday, marking the end of a tumultuous week as US Federal Reserve officials calmed investor fears over a potential liquidity crisis in the banking sector.
While all three major US stock indices started the session sharply lower on the heels of a sell-off among European banks, those losses reversed by closing bell, repeating the intraday roller coaster ride of recent sessions.
At the conclusion of an up-and-down week, marked by a Fed interest rate hike and mounting worries over the health of the US banking system, all three indices notched weekly gains.
The S&P 500 inched up 22.27 points, or 0.56 percent, to close at 3,970.99, after gaining 1.39 percent over the week.
The Dow Jones Industrial Average on Friday rose 132.28 points, or 0.41 percent, to 32,237.53, ending the week 1.18 percent higher, while the NASDAQ Composite added 36.56 points, or 0.31 percent, to close at 11,823.96, gaining 1.66 percent over the week.
“Equity markets drifted higher as concerns lingered about another banking flare-up in the US or abroad,” said David Carter, managing director at JPMorgan Private Bank in New York. “Wall Street is taking its cues from Washington and other capitals as it relates to interest rates and banking regulations.”
Photo: Reuters
In separate appearances, three regional regional Fed presidents said that their confidence that the banking system was not facing a liquidity crisis is what led to the decision to implement a 25 basis point policy rate hike on Wednesday.
However, while Fed officials continue to see additional rate hikes as a strong possibility, financial markets are favoring the likelihood of no hike at all at the conclusion of its next policy meeting in May.
“The Fed may be jaw-boning a bit as it says more rate increases may be coming this year,” Carter said. “It helps both their inflation goal and suggests confidence in our economic system.”
Worries over potential contagion beyond regional banks threatening to spread to their larger peers was sparked by a sell-off of European bank shares.
That sell-off was prompted by the rising cost of insuring Deutsche Bank’s debt, expressed by its credit default swaps, coming on the heels of a Swiss government-sponsored buyout of Credit Suisse.
However, worries over sector-wide stress eased by mid-afternoon on Friday.
Nine of the 11 major sectors in the S&P 500 inched up, with defensive sectors such as utilities and real estate enjoying the biggest percentage gains. Consumer discretionary and financials were the two losers.
US-traded shares of Deutsche Bank dropped 3.1 percent.
Shares of major US banks, such as JPMorgan Chase & Co and Wells Fargo, pared their losses, but still ended lower, while Bank of America flipped green.
Regional lenders PacWest Bancorp and Western Alliance Bancorp jumped 3.2 percent and 5.8 percent respectively, while First Republic Bank dropped 1.4 percent.
Activision Blizzard Inc jumped 5.9 percent after the British competition regulator dropped some competition concerns over a Microsoft Corp-Activision deal.
Advancing issues outnumbered declining ones on the New York Stock Exchange by a 1.47-to-1 ratio, while on the NASDAQ, a 1.26-to-1 ratio favored advancers.
The S&P 500 posted four new 52-week highs and 35 new lows, and the NASDAQ recorded 34 new highs and 298 new lows.
Volume on US exchanges was 11.08 billion shares, compared with the 12.84 billion average over the past 20 trading days.
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