Wall Street closes higher as U.S. Treasury Secretary vows deposits will be kept safe

Wall Street closed higher on Thursday as market participants were reassured by U.S. Treasury Secretary Janet Yellen that measures will be taken to keep Americans’ deposits safe. But Canada’s main stock index closed lower as the energy and financial sectors lost ground.

All three major U.S. stock indexes reversed an earlier rally, turning red before clawing their way back to positive territory in the final hour as Ms. Yellen resumed her congressional testimony.

Dropping U.S. Treasury yields, particularly an 18-basis-point drop in two-year note yields, helped growth shares boost the Nasdaq to the head of the pack.

“You watch this market and you watch it change direction in a short period of time and it’s based on some market participants’ interpretation over what someone said and how it affects how their trading,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta.

“The market as a whole is telling you … there are a lot of different ways to interpret all the things people are saying.”

The session followed Wednesday’s boom-and-bust moves after the Fed’s rate hike, Fed chair Jerome Powell’s subsequent Q&A session and Ms. Yellen’s testimony before Congress, in which she ruled out blanket protection for all deposits.

Interest-rate hikes by central banks around the world have stressed the banking sector, which became manifest with the recent failures of SVB Financial Group and Signature Bank.

Jitters among regional banks persist, with the KBW Regional Bank index sliding 3.0 per cent.

The S&P 500 banks index dipped 1.2 per cent to its lowest level since November, 2020, and it has now fallen over 40 per cent from its record high in February, 2022.

Comments from the Bank of England that inflation will probably quickly fade also helped fuel hopes of light at the end of the central-bank tightening tunnel.

“Every central bank that was on path to raise rates raised them,” Globalt’s Mr. Martin added. “Therefore they’ve all identified that inflation is currently the most important issue and poses the most risk to the system, whereas the effect of higher rates on financial stability isn’t as much of a concern – although it remains highly concerning.”

The Toronto Stock Exchange’s S&P/TSX Composite Index ended down 72.86 points, or 0.4 per cent, at 19,459.92, its lowest closing level since last Friday.

The Toronto market’s heavily weighted financials sector was down 0.7 per cent, while energy fell 1.8 per cent as the price of oil settled 1.3 per cent lower at US$69.96 a barrel.

Oil fell after U.S. Energy Secretary Jennifer Granholm told lawmakers that refilling the country’s Strategic Petroleum Reserve may take several years.

Technology was another bright spot, rising 1.4 per cent.

The S&P 500 gained 11.75 points, or 0.30 per cent, to 3,948.72.

Interest-rate hikes by central banks around the world have stressed the banking sector, which became manifest with the recent failures of SVB Financial Group and Signature Bank.