Market Snapshot: Dow up about 300 points, but off session highs, as concerns about bank stability, credit crunch ease

What’s driving markets

U.S. stocks indexes trimmed some gains in midday trade on Thursday after soaring to session highs in late-morning, as investors reassessed the market’s negative reaction to Federal Reserve’s interest-rate decisions and Treasury Secretary Janet Yellen’s remarks on bank failures.

The S&P 500 had tumbled Wednesday afternoon after Yellen told a Senate committee that blanket deposit insurance hadn’t been considered or discussed by her department.

But stock futures bounced overnight after Citigroup CEO Jane Fraser pushed back against credit-crisis fears while speaking at the Economic Club of Washington, D.C. “This is not a credit crisis. This is a situation where it’s a few banks that have some problems,” Fraser said.

Her comments appeared to have a calming effect on markets, said Rich Farr, chief market strategist at Merion Capital Group, during a phone interview with MarketWatch. He credited her remarks for helping to push U.S. stock futures and Asian markets higher overnight.

Economic data released Thursday showed the number of Americans applying for unemployment benefits last week declined to 191,000, the lowest number in three weeks. New data released Thursday showed new-home sales of 640,000 in February, compared with a revised 633,000 in January.

The data helped assuage investors’ concerns about the outlook for the economy and labor market after Federal Reserve Chair Jerome Powell said he thought a credit squeeze inspired by the failure of three regional banks could potentially hurt the economy and labor market even as it helped to curtail inflation.

Powell also said the banking system is “sound” and that deposit outflows had stabilized.

The Fed raised its policy interest rate by 25 basis points to a range of 4.75% to 5% on Wednesday, just as the market had expected. But Powell made clear he disagreed with investors’ bets that the central bank would cut interest rates repeatedly before the end of 2023.

“Rate cuts are not in our base case,” Powell said.

Stephen Innes, managing partner at SPI Asset Management, said the lift in stocks was a sign that investors were holding out hope that Powell would eventually be proven wrong.

“U.S. futures are nudging higher as the market bets the Fed loses its nerve and downshifts anyway. Note the modern-day history book of Fed pauses is very bullish for stocks,” Innes said in emailed commentary.

Outside the U.S., both the Swiss National Bank and Bank of England delivered interest-rate hikes less than 24 hours after the Fed’s.

The Swiss central bank lifted borrowing costs by 50 basis points after local authorities helped put together a hastily arranged deal for UBS Group
UBS,
-5.20%
to take over scandal-scarred crosstown rival Credit Suisse Group
CS,
-4.80%.
Credit Suisse shares have fallen by 90% over the past year, according to FactSet.

In the U.K., the Bank of England raised its policy rate by 25 basis points, its 11th consecutive increase.

Stocks in focus

• Block Inc.
  SQ,
  -15.51%
  shares plunged 15.1% on Thursday after Hindenburg Research accused the company, which is led by Twitter co-founder and former CEO Jack Dorsey, of facilitating fraud.

• Shares of First Republic Bank
  FRC,
  -8.06%
  traded 7.4% lower as fears of a banking crisis eased.

• Shares of Coinbase Global
  COIN,
  -14.34%
  tumbled 13.5% after the company revealed it had received a Wells notice from the Securities and Exchange Commission.

• Netflix Inc.
  NFLX,
  +7.17%
  was up 9.1%, with shares of the streaming giant heading for their biggest daily gain of the year.

See also:Coinbase’s stock tumbles on SEC warning, while First Republic and Regeneron shares rally, and other stocks on the move

— Jamie Chisholm contributed to this article