Stock market news today: Banks lead stock surge, yields rise as all eyes turn to Fed

Here's what's moving markets on Tuesday, March 21, 2023.

·4 min read

U.S. stocks moved higher Tuesday following U.S. and European efforts to stabilize the banking system.

The S&P 500 (^GSPC) climbed 1.3%, while the Dow Jones Industrial Average (^DJI) gained nearly 1%. Contracts on the technology-heavy Nasdaq Composite (^IXIC) jumped 1.6%.

Bond yields are rising, “potentially indicating less of a recessionary impulse from the banking system,” according to the US Market Intelligence team at JPMorgan. The yield on the benchmark 10-year U.S. Treasury note rose 3.6% Tuesday. On the front end of the yield curve, two-year yields jumped to 4.2%.

The moves Tuesday came on the heels of the Federal Reserve’s all-important interest rate decision Wednesday. Its policy meeting kicked off Tuesday.

To stem the fallout from the turmoil in the banking sector, the U.S. government is exploring ways to guarantee all bank deposits, an effort that wouldn’t need Congress to pass a new law, Bloomberg reported. Treasury Secretary Janet Yellen said at an event Tuesday morning that the government could backstop more deposits if necessary for smaller lenders.

The Federal Reserve's policy-making committee will take center stage Wednesday. On the heels of the banking crisis, central bank officials face a tough decision of whether to raise interest rates again or take a pause amid the turmoil in the banking sector.

Prior to the Silicon Valley Bank fallout, policymakers were poised to hike rates by as much as 50 basis points following a flurry of data showing a resilient economy. But now many market participants forecast a smaller point increase — or none at all.

“Based on Powell’s recent hawkish shift in early March, the market is still giving the Fed room to hike 25bps at this upcoming meeting, but will not allow the Fed to get away with more tightening beyond that,” Victor Masotti, Director of Repo Trading at Clear Street, wrote in a statement.

WASHINGTON, DC - MARCH 08: Federal Reserve Chair Jerome Powell testifies before the House Committee on Financial Services on Capitol Hill on March 08, 2023 in Washington, DC. During the hearing Powell took questions on a range of topics pertaining to the Federal Reserve's Semi-Annual Monetary Policy Report and the state of the economy.  (Photo by Anna Moneymaker/Getty Images)
WASHINGTON, DC - MARCH 08: Federal Reserve Chair Jerome Powell testifies before the House Committee on Financial Services on Capitol Hill on March 08, 2023 in Washington, DC. (Photo by Anna Moneymaker/Getty Images)

The European Central Bank was confronted by a similar scenario on Thursday. As a result, the ECB raised interest rates by 50 basis points, saying it remains committed to dampening inflation while monitoring the turmoil in the banking sector.

“Our economists expect the Fed to follow the ECB’s lead and raise rates in line with expectations, do away with forward guidance, but signal a continued tightening bias,” Jim Reid and colleagues at Deutsche Bank wrote in an early morning note Tuesday.

With Credit Suisse’s (CS) solvency no longer a major concern after the weekend's forced marriage between UBS (UBS) and Credit Suisse, US regional banks remain an area of focus. JPMorgan is reportedly leading talks with other banks about efforts to stabilize First Republic (FRC) after last week’s $30 billion deposit lifeline failed to restore confidence. Shares soared nearly 30% Tuesday after sinking 47% Monday.

Other regional bank stocks making gains Tuesday include PacWest Bancorp (PACW), Zions Bancorporation (ZION), Western Alliance Bancorporation (WAL), and Regions Financial (RF).

Big bank stocks also rebounded, including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C).

Here are other trending tickers on Yahoo Finance:

  • Amazon (AMZN): The company plans to make deeper cuts to its workforce, laying off 9,000 more employees in the coming weeks, CEO Andy Jassy announced in a memo to staff on Monday. The move comes after 18,000 workers were laid off earlier this year. Amazon stock was up nearly 3% Tuesday.

  • Digital World Acquisition Corp. (DWAC): Digital World Acquisition is a SPAC expected to merge with former President Donald Trump's Trump Media & Technology Group. The stock witnessed volatility after Trump said he expected to be arrested on Tuesday over alleged hush-money payments in 2016.

  • Tesla (TSLA): The EV maker's credit rating got a boost from Moody’s Investor Research as Tesla's credit outlook changed to stable. Shares rallied 8%.

  • On Holding AG (ONON): The sportswear company posted a better-than-expected earnings report with strong sales and margin expansion.

Outside of the Fed’s policy meeting, housing data out Tuesday showed that existing home sales jumped 14.5% to an annualized rate of 4.58 million, topping the 4.2 million expected by economists, according to Bloomberg data.

On the earnings calendar, results from Nike (NKE) and Darden Restaurants (DRI) are set to be released this week, providing an update on the state of the consumer.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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