- US stocks were mixed Monday following the failure and regulatory seizure of First Republic Bank.
- JPMorgan will takeover $92 million of the bank's deposits and CEO Jamie Dimon said the financial system is "sound."
US stocks traded mixed on Monday as investors entered trading in May assessing what's next for the financial system after First Republic Bank this weekend became the second largest bank failure in US history.
First Republic Bank shares plunged 46% in early trading after the bank was seized Sunday by regulators and the bulk of its assets were taken over by JPMorgan.
JPMorgan shares moved higher. CEO Jamie Dimon on an early Monday conference call reportedly said the system is "very, very sound," in the wake of its deal and that this portion of the banking crisis is "over". JPMorgan said it was assuming deposits of about $92 billion and the FDIC expected the cost to its Deposit Insurance Fund will be about $13 billion.
The industry has been shaken since the collapse and seizures of Silicon Valley Bank and Signature Bank in March. First Republic was shaken in the aftermath, but a big bank rescue that saw an infusion of $30 billion in deposits was thought to have stabilized the bank.
However, in reporting earnings results last week, First Republic revealed that $100 billion had flowed out of the bank, causing new concerns about its viability leading up to Sunday's takeover.
Here's where US indexes stood shortly after the 9:30 a.m. opening bell on Monday:
- S&P 500: 4,169.54, up 0.01%
- Dow Jones Industrial Average: 34,152.35, up 0.16% (54.19 points)
- Nasdaq Composite: 12,202.03, down 0.14%
"Confidence in the banking sector has now weakened further, which means that investors should expect financial markets to remain on the defensive," Jameel Ahmad, chief analyst at CompareBroker.io, in a Monday note.
The Fed on Wednesday will likely move forward with raising interest rates as largely expected, with markets pricing in another rate hike of 25 basis points
"However, what investors will want to hear from the U.S Federal Reserve and Chair Jerome Powell specifically is what the central bank really thinks about the clear stresses visible within the banking sector," said Ahmad.
Treasury Secretary Janet Yellen recently said the US banking system is sound, but "the events that are taking place within the sector suggest otherwise," Ahmad added.
Here's what else is happening today:
- "The market is getting impatient": Here's what investors are looking for at this week's Fed policy meeting.
- Stocks could soon retest all-time highs as markets react to possible "thesis changing" final rate hike from the Fed, Fundstrat says.
- From a credit crunch to a meltdown in the commercial real estate market, here's what top economists are predicting for the coming months.
- In commodities, bonds, and crypto:
- West Texas Intermediate crude dropped 2% to $75.20 per barrel. Brent crude, the international benchmark, fell 1.9% to $78.87.
- Gold gained 0.4% to $2,006.10 per ounce.
- The 10-year Treasury yield rose 2 basis points to 3.48%.
- Bitcoin declined 2.4% to $28,561.05.