Stocks rose Friday after a volatile trading session. Although Friday began with fears that the banking crisis was spilling over to Deutsche Bank, the markets rebounded to end the week on a higher note.
The Dow Jones Industrial Average gained 132.28 points, or 0.41%, closing at 32,237.53. The S&P 500 rose 0.56%, while Nasdaq Composite ticked up 0.3%. The major indexes all had a winning week, with the Dow gaining 0.4% week-to-date as of Friday afternoon, while the S&P 500 and Nasdaq gained 1.4% and 1.6%, respectively.
One factor that helped the market was a bounce back in regional bank stocks. The sector rallied on Friday, with the SPDR S&P Regional Banking ETF gaining 3.01% during the trading session. Amid all the volatility, the KRE ended the week up 0.18%.
A selloff of Deutsche Bank’s U.S.-listed shares Friday morning put downward pressure on market sentiment and the major indexes, before the bank recovered some of its earlier losses. Deutsche Bank closed 3.11% lower Friday, rebounding from a 7% drop earlier in the trading session.
A selloff of shares was triggered after the the German lender’s credit default swaps jumped, but without an apparent catalyst. The move appeared to raise concerns once again over the health of the European banking industry. Earlier this month, Swiss regulators forced a UBS acquisition of rival Credit Suisse. Deutsche Bank shares traded off their worst levels of the session, which caused major U.S. indexes to also cut their losses.
“I think that the market overall is neither frightened nor optimistic — it’s simply confused,” said George Ball, president at Sanders Morris Harris. “The price action for the last month-and-a-half, including today, is a jumble without any direction or conviction.”
European Central Bank President Christine Lagarde tried to ease concerns, saying euro zone banks are resilient with strong capital and liquidity positions. Lagarde said the ECB could provide liquidity if needed.
Investors continued to assess the Fed’s latest policy move announced this week. The central bank hiked rates by a quarter-point. However, it also hinted that its rate-hiking campaign may be ending soon. Meanwhile, Fed Chair Jerome Powell noted that credit conditions have tightened, which could put pressure on the economy.
On Thursday, Treasury Secretary Janet Yellen said regulators are prepared to take more action if needed to stabilize U.S. banks. Her comments are the latest among regulators attempting to buoy confidence in the U.S. banking system in the wake of the Silicon Valley Bank and Signature Bank closures.
Ball said that Deutsche Bank is “very sound financially,” noting that the market was “overreacting” in wake of the earlier bank failures.
″[Deutsche] could be crippled if there’s a big loss of confidence and there’s a run on the bank. There is, however, no fundamental reason why that should occur, other than nervousness.”
