US banking system stabilized, with stock market bounce back

US stock market recovery/Shutterstock Images

Wall Street closed higher on Tuesday as widespread fears  in the banking sector abated, according to Reuters.

All three major U.S. stock indexes were bright green as the session closed, with energy (.SPNY) consumer discretionary (.SPLRCD) and financials (.SPSY) enjoying the most sizable gains.

A one-two punch of US regional bank failures last week, followed by the rescue of First Republic Bank (FRC.N) and the takeover of Credit Suisse, sparked a rout in banking stocks.

But banking stocks (.SPXBK) bounced back on Tuesday, building on Monday’s reversal. Still, despite its recent resurgence, the S&P Banks index has lost more than 18% of its value just this month.

“The stock market is coming to a recognition that the banking crisis wasn’t a crisis after all, and was isolated to a handful of banks,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York. “Both the public and the private sector have shown they are more than able to backstop and shore up weak institutions.”

Treasury Secretary Janet Yellen, in prepared remarks before the American Bankers Association, said the U.S. banking system has stabilized due to decisive actions from regulators, but warned more action might be required.

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