Nasdaq 100, Dow Jones, S&P 500: JPMorgan’s Acquisition of First Republic Bank Boosts Market Confidence

Highlights

• JPMorgan Chase acquires First Republic Bank, boosting market confidence
• Big banks are viewed as more stable and diverse compared to narrow banks
• Regional banking stocks decline, with some exceptions

Overview

On Monday, the first day of the month, the major U.S. stock indexes are trading mixed as investors analyzed the acquisition of the bankrupt First Republic bank by JPMorgan Chase.

At 14:00 GMT, the blue chip Dow Jones Industrial Average is trading 34170.82, up 72.66 or +0.21%. The benchmark S&P 500 Index is at 4172.94, up 3.46 or +0.08% and the tech-driven NASDAQ is trading 12217.39, down 9.19 or -0.08%.

JPMorgan Acquires Troubled First Republic

JPMorgan Chase has purchased troubled lender First Republic’s deposits and a significant portion of its assets, causing JPMorgan’s shares to rise by over 2%. According to JPMorgan Chase CEO Jamie Dimon, the deal resolves much of the fallout in the banking sector since the unexpected collapse of Silicon Valley Bank in March.

First Republic’s stock has been struggling, with deposits falling by more than 40% in the first quarter and shares plummeting 97% since the beginning of the year. As a result, the stock is currently halted for trading as of Monday morning.

This acquisition is changing the way big banks are viewed. They are no longer seen as a source of systemic risk but rather as stabilizers. Furthermore, big banks are no longer seen as overly complex but are instead viewed as diverse enough to absorb issues. Ironically, the troubles of narrow banks like First Republic are highlighting the advantages of big banks.

Regional Bank Stocks Open Lower

On Monday morning, regional stocks opened lower, with the S&P 500 Regional Bank ETF (KRE) declining by 1.15%. Zions Bancorp and First Horizon’s shares fell by 1.1% and 0.2%, respectively. However, First Horizon’s shares bucked the trend, rising by 2.3%.

Several stocks made notable moves shortly after trading opened. First Republic Bank shares fell over 45% and were halted during premarket trading after JPMorgan took control of the bank when it was taken over by regulators. Meanwhile, JPMorgan Chase’s stock rose by 3.6% in premarket trading.

Q1 Earnings Beats Boost Norwegian Cruise Lines, SoFi Technologies

Norwegian Cruise Line shares rose by 3% after the company beat Q1 expectations.

General Motors‘ stock climbed nearly 3% in premarket trading after Morgan Stanley upgraded the company to overweight from equal weight. On the other hand, Exxon Mobil’s shares fell by 1.5% after Goldman Sachs downgraded the stock to neutral from buy.

SoFi Technologies‘ shares rose by 6% after the company’s Q1 results exceeded expectations. Finally, ON Semiconductor‘s shares rose by 1.2% ahead of the firm’s Q1 earnings report later in the day. Analysts expected the company to report a profit of $1.09 per share on revenue of $1.93 billion.

For a look at all of today’s economic events, check out our economic calendar.