4:13pm: Indexes endure up and down day
The Dow closed Monday down 46 points, 0.1%, at 34,052, the Nasdaq Composite lost 14 points, 0.1%, to 12,213 and the S&P 500 slid 2 points to 4,168. The small-cap Russell 2000 index added 1 point to 1,770.
It was a choppy day for the benchmarks, as the news of JPMorgan's purchase of most of First Republic Bank (NYSE:FRC)'s operations dominated the day.
Some experts are worried about the implications for other regional banks, such as Infrastructure Capital Managment CEO Jay Hatfield.
“I wouldn’t be surprised if there aren’t some more attacks on regional banks, by short sellers. Particularly, not so much during earnings season, but when we get into May and June, and when people are looking for shorts to hedge their book,” Hatfield said.
“We have the debt crisis looming, so I would be surprised if we don’t have some other banks coming under attack, particularly [with] the Fed raising rates [and] putting tremendous pressure on the financial system by keeping the yield curve so steeply inverted,” Hatfield added
12.05pm: JPMorgan Chase stock up 3% as company helps stabilize banking system
US stocks were mixed in noon trading after regulators sold most of the First Republic Bank (NYSE:FRC)'s operations to JPMorgan Chase.
At midday, the Dow rose 66 points to 34,165, while the S&P 500 added 5 points at 4,175 and the tech-heavy Nasdaq eased 15 points to 12,211.
“This is changing the narrative on big banks,” Allianz chief economic advisor Mohamed El-Erian said.
“Big banks are no longer viewed as a source of systemic risk; they’re viewed as stabilizers,” he added.
Other notable movers included shares of SoFi Technologies Inc, which slid 12% even as the financial services provider’s 1Q results topped expectations on the top and bottom lines on strong year-over-year growth in both members and products.
9:40am: Busy week ahead
US stocks started the day mixed in cautious trading ahead of the Federal Reserve’s May rate-setting meeting which kicks off tomorrow.
Also on the docket this week are earnings from the likes of Apple, Pfizer, Starbucks, Ford, and Uber and the key US non-farm payrolls jobs report due on Friday.
Just after the opening bell on Monday, the Dow Jones had added 50 points or 0.2% at 34,149 points, while the Nasdaq was down 15 points or 0.1% at 12,212 points and the S&P 500 was flat at 4,169 points.
In terms of major movers, SoFi Technologies shares initially rose in pre-market trading but were down about 4.1% at US$5.97 at the open after the financial services company posted an earnings beat.
JP Morgan Chase & Co was trading up about 2.7% at US$141.92 following the news of its purchase of First Republic Bank (NYSE:FRC). First Republic Bank’s shares were halted right after the opening bell but had been changing hands just prior to the halt at US$3.51.
7:55am: JPMorgan takes over First Republic deposits
Wall Street is likely to open flat as traders await the outcome of the Federal Reserve’s two-day rate-setting meeting beginning Tuesday and news emerges that JPMorgan Chase & Co (NYSE:JPM) has acquired all of First Republic Bank (NYSE:FRC)'s deposits amid another busy week for corporate earnings.
Futures for the Dow Jones Industrial Average rose three points in Monday pre-market trading, while those for the broader S&P 500 index fell 1 point and contracts for the Nasdaq-100 were five points lower.
The main US benchmarks ended higher on Friday as companies continued to report quarterly results that largely topped expectations. The DJIA rose 0.8% to 34,098, the Nasdaq Composite added 0.7% to 12,227 and the S&P 500 gained 0.8% to 4,169.
"Sentiment in Friday’s trading session was surprisingly resilient to further deterioration in the First Republic Bank (NYSE:FRC) situation. The FRC dived another 43% on Friday as no solution to save the bank popped up by magic,” commented Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
After talks that continued through the weekend, The California Department of Financial Protection and Innovation (DFPI) announced early Monday that regulators have taken possession of First Republic Bank (NYSE:FRC).
The DFPI appointed the Federal Deposit Insurance Corporation (FDIC) as receiver of First Republic Bank (NYSE:FRC) with the FDIC accepting a bid from JPMorgan Chase Bank, National Association, Columbus, Ohio, to assume all deposits, including all uninsured deposits, and substantially all assets of First Republic Bank (NYSE:FRC).
“Good news is that the US futures don’t seem to be under pressure at the time of writing. The S&P500 futures are flat to slightly positive. The FRC drama, and the inevitable outcome, has seemingly been broadly priced in by now,” Ozkardeskaya added.
Despite the latest banking drama, she noted that the Fed is expected to raise the rates by another 25 basis points when it wraps up its meeting on Wednesday.
"Activity on Fed funds futures gives around 85% chance for a quarter-point hike this week,” Ozkardeskaya said. "But note that a 25bp hike from the Fed will likely have the impact of a bigger hike if the credit conditions in the US continue tightening because of the ongoing stress in US regional banks."
Contact the author at stephen.gunnion@proactiveinvestors.com