After a rocky start to the day, the major averages rose end the day and week reversing their earlier session declines as Deutsche Bank shares pared back some losses. The Dow Jones Industrial Average gained 132 points, or 0.41%, closing at 32,238. The S&P 500 rose 22 points or 0.57%, while Nasdaq Composite added 36 points. The major indexes rose for the week with the Dow gaining 0.4% week-to-date as of Friday afternoon, while the S&P 500 and Nasdaq gained 1.4% and 1.6%, respectively.
Deutsche Bank's U.S.-listed shares slid 3.11% Friday, rebounding from a 7% drop earlier in the trading session. A selloff of shares was triggered after the the German lender's credit default swaps jumped, but without an apparent catalyst. The move appeared to raise concerns once again over the health of the European banking industry. Earlier this month, Swiss regulators forced a UBS acquisition of rival Credit Suisse. Deutsche Bank shares traded off their worst levels of the session, which caused major U.S. indexes to also cut their losses.
"I think that the market overall is neither frightened nor optimistic — it's simply confused," said George Ball, president at Sanders Morris Harris. "The price action for the last month-and-a-half, including today, is a jumble without any direction or conviction."
Ball added that Deutsche Bank is "very sound financially." "It could be crippled if there's a big loss of confidence and there's a run on the bank. There is, however, no fundamental reason why that should occur, other than nervousness."
European Central Bank President Christine Lagarde tried to ease concerns, saying euro zone banks are resilient with strong capital and liquidity positions. Lagarde said the ECB could provide liquidity if needed.
Investors continued to assess the Fed's latest policy move announced this week. The central bank hiked rates by a quarter-point. However, it also hinted that its rate-hiking campaign may be ending soon. Meanwhile, Fed Chair Jerome Powell noted that credit conditions have tightened, which could put pressure on the economy.
On Thursday, Treasury Secretary Janet Yellen said regulators are prepared to take more action if needed to stabilize U.S. banks. Her comments are the latest among regulators attempting to buoy confidence in the U.S. banking system in the wake of the Silicon Valley Bank and Signature Bank closures.
"Retail [and] institutional investors are both looking at the banking system, but now internationally. That's dangerous," Ball added. "Banks exist because of confidence in their stability, and that confidence can be eroded as we now see, via social media and technology in a matter of minutes."
All comments contained herein are for informational purposes only, and should not be considered as a solicitation to buy or sell any security. The firm does not guarantee the accuracy or completeness of the information or make any warranties regarding results from it's usage.