CNBC – UPDATED MON, MAY 1 20236:25 PM EDT
The Dow Jones Industrial Average inched lower Monday in the wake of the government’s seizure of First Republic over the weekend and the bank’s subsequent sale to JPMorgan Chase.
The Dow dipped 46.46 points, or 0.14%, to end the session at 34,051.70. The S&P 500 ticked down 0.04% to close at 4,167.87. The Nasdaq Composite fell 0.11%, ending at 12,212.60.
JPMorgan Chase shares rose 2.1% after it emerged as the winner of a weekend auction for First Republic. The big bank has acquired all of troubled lender First Republic’s deposits and a “substantial majority of assets.” This deal means that JPMorgan Chase, already one of the biggest U.S. banks, will become even larger.
JPMorgan Chase CEO Jamie Dimon said that the deal resolves much of the fallout in the banking sector that has started since the sudden collapse of Silicon Valley Bank in March.
“There are only so many banks that were offsides this way. There may be another smaller one, but this pretty much resolves them all; this part of the crisis is over,” Dimon told shareholders in a call after the deal was announced.
Infrastructure Capital Managment’s CEO Jay Hatfield was wary that the takeover deal could quell further fallout among the regional bank stocks.
“I wouldn’t be surprised if there aren’t some more attacks on regional banks, by short sellers. Particularly, not so much during earnings season, but when we get into May and June, and when people are looking for shorts to hedge their book,” he said.
“We have the debt crisis looming, so I would be surprised if we don’t have some other banks coming under attack, particularly [with] the Fed raising rates [and] putting tremendous pressure on the financial system by keeping the yield curve so steeply inverted,” Hatfield added.
The SPDR S&P Regional Bank ETF (KRE) slipped on Monday, declining more than 2%. Zions Bancorp shares shed 3.7%, and PacWest shares tumbled 10.6%.
First Republic reported last week that deposits tumbled more than 40% in the first quarter, triggering further declines in the already struggling stock. Shares have cratered 97% since the start of the year. The stock is halted for trading as of Monday.
Investors are looking to several big-name companies releasing their earnings this week. Tech giant Apple and other headliners Qualcomm and AMD are scheduled to announce their quarterly results.
First Republic’s demise and any potential fallout adds to the tension ahead of the Fed’s interest rate decision on Wednesday. The central bank is largely expected to hike one more time before pausing.
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