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NEW YORK, March 24 (AP) – Stocks were volatile on Wall Street on Friday amid worries about banks on both sides of the Atlantic.
The S&P 500 was up 0.3% in afternoon trading after falling for much of the morning, putting it on track for a second straight weekly gain.
The Dow Jones Industrial Average was up 73 points, or 0.2%, at 32,179 as of 2:53 p.m. ET, while the Nasdaq Composite was down 0.1%.
Markets have been jittery on concerns that banks are weakening under the pressure of much higher interest rates.
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That has led to growing fears of a possible recession and deep uncertainty about how the Fed and other central banks will handle future interest rates.
Much of the focus on Friday was on Deutsche Bank, whose shares fell 8.5% in Germany. Shares and confidence in Swiss bank Credit Suisse fell so much earlier this month that regulators prompted rival UBS to buy it.
Credit Suisse faces a relatively unique set of long-term troubles. But earlier this month, the collapse of the second- and third-largest banks in U.S. history has put the entire banking sector under sharper scrutiny.
Other big European banks also fell on Friday, with Commerzbank down 5.5 percent, BNP Paribas down 5.3 percent and UBS down 3.5 percent.
Wall Street banks were mixed, with JPMorgan Chase & Co down 1.4 percent and Bank of America up 0.9 percent.
In the U.S., investors are mostly focused on banks that could face exodus of customers, similar to what brought down Silicon Valley Bank and Signature Bank.
Investors have focused on smaller banks, which are smaller than “too big to fail” banks and considered riskier.
First Republic Bank was largely unchanged.
Treasury Secretary Janet Yellen has said that if the government deems the entire system at risk, it will guarantee deposits for bank customers, even those with amounts greater than $250,000 insured by the FDIC. Valley Bank and Signature Bank.
But Yellen also didn’t offer a blanket guarantee this week for all depositors at all banks.
Cash-strapped banks are still queuing up to borrow from the Fed this week. Emergency lending to banks fell slightly in the past week — to $164 billion — but remained high, the Federal Reserve said on Thursday.
A big concern is that all the pressure on banks will lead to a reduction in SME lending across the country. That in turn could lead to lower hiring, a weaker economy and an increased chance of a recession, which many economists already see as a strong possibility.
While the job market remains remarkably solid, the rest of the economy has weakened under the pressure of rising interest rates. On Friday, reports on the economy were mixed. A report showed orders for durable manufactured goods fell short of economists’ expectations last month.
However, a second report showed business activity rose at its fastest pace in almost a year. The preliminary report from S&P Global beat economists’ expectations.
Fed Chairman Jerome Powell said concerns about a pullback in lending prompted the central bank to raise interest rates by just a quarter of a percentage point this week, rather than the more aggressive half-percentage point, to fight inflation.
Higher interest rates can weaken inflation by slowing the overall economy, but they increase the risk of recession.
They also hurt the prices of stocks and other investments. For Silicon Valley Bank and other banks, that means a hit to their holdings of super-safe Treasuries.
The Fed has raised its main overnight interest rate to 4.75% to 5% from almost zero early last year.
It signaled it may raise rates one more time before leaving them on hold until the end of the year.
Traders, however, were more skeptical.
The growing likelihood of a recession has them betting that the Fed will have to cut rates as soon as possible this summer to relieve some of the pressure on banks and the economy.
This speculation intensifies the drive for investors to pile into any asset deemed safe, and these factors combine to cause huge, sometimes wild swings in the bond market.
Yields fell further on Friday. The yield on the 10-year Treasury note, which helps set rates on mortgages and other lending, fell to 3.38% from 3.42% late Thursday. It was above 4% earlier this month.
The decline was more dramatic in the two-year yield, which more closely tracks expectations for the Federal Reserve.
It fell to 3.78% from 3.83% late Thursday and more than 5% earlier this month. (Associated Press)
(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)
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