Shares of regional banks posted big gains on Tuesday as they regained their footing after huge losses in the previous session, but volatility continued in the sector following the demise of Silicon Valley Bank, Signature Bank and Silvergate Capital in the past week.
While the rise in some cases is eye-popping, most stocks have yet to recover fully from losses in the past few days. Most stocks are trading well below their levels from a week ago, even with Tuesday’s gains.
Among exchange-traded funds in the financial sector, the KBW Nasdaq Bank Index BKX, +4.26% rose 5.3%, the SPDR S&P Regional Banking ETF KRE, +5.58% advanced by 7% and the Financial Select Sector SPDR ETF XLF, +2.10% rose 2.7%.
Some positive developments may have also encouraged buying.
The Ken Griffin-controlled hedge fund Citadel Advisors LLC disclosed that it has acquired a 5.3% stake in Western Alliance Bancorp WAL, +41.48%, according to a 13G filing with the Securities and Exchange Commission.
Citadel said it now owns 5.78 million Western Alliance shares, up from 1.31 million as of the end of 2022.
Western Alliance’s stock was a top gainer in the sector with a rise of nearly 44%, nearly wiping out its 47% loss from the previous session.
Meanwhile, moves by the federal government to backstop uninsured bank deposits seemed to finally sink in.
KBW analysts said banks with larger holdings of uninsured despots were a target in the selloff.
Uncertainties persist in the sector around fears of uninsured deposits, increased bank regulations and the effectiveness of the new backstop program by the Fed for banks, KBW said Tuesday.
“Investors are becoming more cautious about the banking sector’s earnings/profitability outlook on the other side of [Monday’s] stress, which could have negative implications for valuation,” KBW said.
Meanwhile, Moody’s Investors Service on Tuesday downgraded the U.S. banking system to negative from stable. The rating agency said the move reflects “the rapid deterioration in the operating environment” following deposit runs and failures of Silicon Valley Bank, Signature Bank and Silvergate Bank.
Meanwhile, Moody’s put six regional banks under review for a potential downgrade, although the rating agency gave credit to First Republic Bank’s “official sector borrowing capacity” and its strong franchise in private banking and private wealth management for high-net-worth individuals.
In morning action, First Republic Bank FRC, +56.28% rose 49% after losing nearly 62% of its value on Monday. The stock is still trading at less than half its roughly $114 value a week ago.
PacWest Bancorp PACW, +67.08% is up 56% after retreating by 21% in regular trades on Monday.
Comerica Inc. CMA, +10.76% rose by 11% after a 28% retreat on Monday.
Customers Bancorp Inc. CUBI, +11.42% CUBI, +11.42% rose 12.6% after dropping 24% in the previous session.
Metropolitan Bank Holding Corp. MCB, +53.09% is up by 46.4% after a nearly 44% drop on Monday.
KeyCorp. KEY, +13.75% jumped 14.5% after dropping by 27%, while PNC Financial Services Group Inc. PNC, -0.74% rose 5.1% after losing 5.2% in the previous session. Citizens Financial Group Inc. CFG, +4.09% is up by 6.5% after dropping 11% on Monday. Regions Financial Corp. RF, -1.03% dipped by 0.4%.
Among exchange-traded funds in the financial sector, the KBW Nasdaq Bank Index BKX, +4.26% rose 3.9%, the SPDR S&P Regional Banking ETF KRE, +5.58% advanced by 8.2% and the Financial Select Sector SPDR ETF XLF, +2.10% rose 2.6%.
This article was originally published by Marketwatch.com. Read the original article here.
