Stocks rose Thursday in New York but only after another dizzying day for Wall Street, where a big show of strength in morning trading vanished and worries rose about the banking industry.
The S&P 500 added 0.3% for its third gain in four days, but the benchmark index had been on track for a much healthier gain of 1.8% in the morning. The Dow Jones Industrial Average saw an early gain of 481 points disappear and likewise dipped to a brief loss before closing with a gain of 0.2%. Strength for technology stocks helped the Nasdaq composite hold up better than the rest of the market, adding 1%.
Two big questions have been causing big swings for Wall Street this month, and investors still don't have answers. On one hand, investors are worried about whether more banks will suffer a debilitating exodus of customers after the second- and third-largest U.S. bank failures in history this month. On the other, the turmoil is clouding the outlook for what the Federal Reserve will do with interest rates after raising them to market-rattling heights over the past year.
"Until these two clouds get resolved, it's hard to see the market making any sustained headway," said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.
"I do think it's something where it could calm down on its own," Ma said about the crisis pounding the banking industry, "and I hope that it does. But it's not clear why that would happen" without more forceful action from the federal government.
A day earlier, stocks fell sharply after the Fed indicated that while the end is perhaps near for its rate increases, policymakers still don't expect to cut rates this year. Fed Chair Jerome Powell also insisted the central bank is prepared to keep raising rates if inflation stays high.
Traders Thursday nevertheless were still largely betting the Fed will cut rates later this year. Such cuts can act like steroids for markets, juicing prices for stocks, bonds and other investments. Rate cuts also relaxes pressure on the banking industry and economy but are expected to give inflation more fuel.
Big technology and other high-growth stocks that tend to benefit the most from lower rates were among the strongest on Wall Street. Nvidia Corp. rose 2.7%, and Microsoft Corp. gained 2%.
Stocks in the financial industry ended up being the heaviest weight on the S&P 500 despite rising in the morning. First Republic Bank, which has been at the center of investors' crosshairs over the last couple weeks, fell 6% after giving up a gain of nearly 10% in early trading.
The fear is that the turmoil in the banking industry will cause a sharp pullback in lending to small and midsize businesses around the country. That is expected to put more pressure on the economy, raising the risk for a recession that many economists already see as likely.
Powell said such fears were part of the reason the central bank raised rates by only a quarter of a percentage point Wednesday. A pullback in lending is expected to act almost like a rate increase on its own, he said.
Shares of Coinbase Global Inc. fell 14.1% after the cryptocurrency trading platform said it had been warned by the Securities and Exchange Commission that it could face charges of violating U.S. securities laws.
All told, the S&P 500 rose 11.75 points to 3,948.72. The Dow gained 75.14 points to 32,105.25, and the Nasdaq climbed 117.44 points to 11,787.40.
In the U.S. bond market, which has been home to some of Wall Street's wildest moves this month, yields fell. The yield on the two-year Treasury dropped to 3.81% from 3.97% late Wednesday. It was above 5% earlier this month.
Abroad, stocks in London fell 0.9% after the Bank of England also raised its key rate by a quarter-point. Stocks were mixed elsewhere across Europe and Asia.
Information for this article was contributed by Yuri Kageyama and Mat Ott of The Associated Press.