Latest on the banking crisis and global markets

Stocks closed higher on Monday as investors grew more optimistic about global regulators' ability to contain the banking crisis.

The rally comes after UBS agreed to buy troubled Swiss lender Credit Suisse for $3.25 billion on Sunday. The bank's move is the latest in a string of interventions from global governments and industry players who have stepped in to help stymie the tumult in the financial sector.

Shares of UBS rose about 3.3% in an intraday reversal. Shares of New York Community Bancorp soared by over 31%, lifted by its purchase of virtually all of Signature Bank's deposits and $38.4 billion worth of the failed bank's assets.

Still, regional banks aren't out of the woods just yet. Shares of First Republic fell to an intraday record low before ending the session down about 47% in another day of steep losses for the company.

Recession fears also continued to dog investors ahead of the Federal Reserve's meeting set to conclude Wednesday. Traders see about a 73% probability of the central bank raising interest rates by a quarter point.

West Texas Intermediate settled at about $67 a barrel.

The VIX, known as Wall Street's fear gauge, rose to about 24.

The Dow rose about 382 points, or 1.2%.

The S&P 500 gained about 0.9%.

The Nasdaq Composite climbed about 0.4%

S&P Global on Monday revised down its outlook on UBS after the bank agreed to rescue Swiss rival Credit Suisse in a $3.25 billion deal.

The credit ratings agency changed its outlook to negative from stable, citing "material execution risk" concerns with UBS's acquisition of Credit Suisse.

"In our base case, we already anticipate client churn at the combined entity, particularly in wealth management and Swiss banking, where both entities have significant client overlaps," S&P Global said in a note.

S&P Global maintained its issuer credit ratings for UBS.

The top Senate Republican and top House Republican with jurisdiction to oversee the Federal Reserve have requested information from the central bank and the Federal Deposit Insurance Corporation regarding the failed Silicon Valley and Signature banks.

Sen. Tim Scott, the top Republican on the Senate Banking Committee, and Rep. Patrick McHenry, chairman of the House Financial Services Committee, requested in a letter a timeline of “the Federal Reserve’s lending, supervisory, and examination activity for the last two years with regards to SVB/and or Signature Bank,” and the names and titles of all people from the Fed involved in the process. 

In a letter to the FDIC, they similarly requested, “events related to the FDIC’s supervisory or resolution related activity for the last two years with regards to SVB and/or Signature Bank,” and the names and titles of those involved at the FDIC. 

The deadline for the documents is March 31.

Last week the House Financial Services Committee announced it would hold a hearing with financial regulators over the failure of SVB and Signature Bank. 

One of Europe’s leading banks moved quickly Monday to reassure investors it isn’t holding significant quantities of a particularly risky type of bonds issued by Credit Suisse.

“Our exposure to Credit Suisse’s AT1s is near zero,” Deutsche Bank said in a statement.

Deutsche Bank had its own share of troubles in the middle of the past decade, but Germany’s biggest bank has rebounded strongly, and last month reported its highest pre-tax profit in 15 years.

Shares in the bank were down 3% on Monday, broadly in line with the wider European banking sector.

Christine Lagarde, president of the European Central Bank, said in a speech Monday afternoon that banks in the euro area had a “very limited exposure” to Credit Suisse, particularly in relation to AT1 bonds.

“We’re not talking billions, we’re talking millions,” she said.

Analysts said the surprise move to wipe out Credit Suisse’s AT1 bondholders had unsettled investors, particularly as shareholders – typically the last in line for a payout when a bank fails – would be receiving something.

EU banking regulators, while welcoming the “comprehensive set of actions” taken Sunday by Swiss authorities, said Monday they would act differently if ever the need arises.

“In particular, common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier One be required to be written down,” the Single Resolution Board (SRB), the European Banking Authority and the European Central Bank said in a joint statement. “This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions.”

Some background: AT1s belong to a type of bank capital known as “contingent convertibles.” They are popular with institutional investors because they often offer a higher yield than other bank debt and corporate bonds with a similar rating. However, their “convertible” nature means they can be written down completely, or swapped for equity if a bank gets into distress.

Stocks teetered Monday as investors juggled the uncertainty surrounding the banking crisis and the Federal Reserve's upcoming meeting this week.

The Dow rose roughly 1% by the end of the morning trading session. The S&P 500 gained about 0.6%. The Nasdaq Composite fell about 0.03%.

Recession fears continued to loom over Wall Street, and investors accordingly sought refuge in safety stocks. Gold continued its rise to roughly $1,972 a troy ounce.

Bitcoin eased back from earlier levels but remained up at $27,960 per coin, in another sign that investors are seeking steady places to stash their cash.

"There's still a tremendous amount of risk around the Fed policy meeting on Wednesday," said Edward Moya, senior market analyst at OANDA.

CNN's Fear and Greed Index was at 29, indicating fear on Wall Street. That's up from last week, when the index suggested extreme fear was permeating markets.

Still, investors were heartened by global regulators' steps to contain the tumult in banking. UBS on Sunday agreed to buy rival Swiss bank Credit Suisse in a move to both rescue the embattled lender and help instill faith in the global financial sector.

First Republic's stock continued to tumble on Monday and the San Francisco-based bank's shares were halted multiple times for volatility, having fallen 46% by midday.

Despite having received a $70 billion loan from JPMorgan Chase a week ago and another $30 billion lifeline from a consortium of banks on Thursday, investors weren't optimistic about the bank's prospects.

Thursday's government-arranged deal amounted to a big cash deposit that would allow First Republic to meet customers' demands for withdrawals. That may have helped alleviate the bank run for the time being, said Patricia McCoy, a law professor at Boston College. "But it doesn't solve this profitability problem," she said in an interview Friday.

Banks, led again by JPMorgan, are trying to work on yet another rescue plan for First Republic on Monday, the Wall Street Journal reported.

The UBS rescue of Credit Suisse is an encouraging development that should help boost diminished confidence in the global banking system, according to Moody’s Analytics chief economist Mark Zandi.

Zandi described the UBS-Credit Suisse deal – one that was pushed by Swiss regulators – as a “big plus.”

“Governments are judiciously resolving the weak links in the global financial system by either shutting them down (SVB and Signature), merging them with strong institutions (Credit Suisse) or organizing support for struggling institutions (First Republic),” Zandi told CNN in an email on Sunday.

Those steps – combined with the FDIC guaranteeing all deposits at failed institutions and the Fed launching a new bank lending program – “should restore confidence in the soundness of the financial system,” Zandi said.

The FDIC also announced an agreement Sunday night to sell most of failed Signature Bank to Flagstar Bank owner New York Community Bank.

“There should be no doubt that depositors will get their deposits when they want them,” Zandi said. 

The US banking sector is in good shape despite the global banking crisis, the co-president of Alliance Partners and a former financial economist for the Securities and Exchange Commission says.

"The US is fundamentally in good shape. I think we have really strong community banks, regional banks, you know, the country's largest banks have certainly been stepping up to do what they can to stabilize the system, Lori Bettinger told CNN Chief Correspondent Christine Romans on Monday. "

A cautiously optimistic Bettinger says the next week will be crucial as bank jitters grip consumers and investors on Wall Street.

Bettinger also says most consumers shouldn't be concerned about the banking industry's health, reaffirming the United States Treasury secretary's message that their money is safe.

In a potentially good sign for the on-edge banking industry, the FDIC says there's “substantial interest” in the remnants of Silicon Valley Bank — so the agency is extending the bidding process to give interested parties more time. 

“The FDIC and the bidders need more time to explore all options in order to maximize value and achieve an optimal outcome,” it said in a statement Monday. 

Just over a week ago, the FDIC took over Silicon Valley Bank and Signature Bank after both suffered a sudden run on deposits. Already, the FDIC has managed to offload much of what remains of Signature’s business to Flagstar Bank, a subsidiary of New York Community Bank.

While Flagstar appeared reluctant to take on all of Signature’s assets — about $60 billion of which will stay in FDIC receivership — the agreement suggests there’s still appetite for deals, even despite banks’ badly shaken confidence over the past 10 days.