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After Monday's heavy selling, shares of First Republic rose sharply Tuesday morning as worry over the solvency of regional banks appeared to calm down.
The stock was one of the highest-performing names in the SPDR S&P Regional Banking ETF (KRE), which rose 8 percent, while the stock itself was up by 57 percent in early trading. First Republic was not the only regional bank to see a surge, with PacWest jumping 52 percent, Zions Bancorp rising 17 percent, and KeyCorp gaining 15 percent. Charles Schwab also rebounded and gained more than 9 percent after plummeting almost 12 percent on Monday.
The increases come after regional banks fell drastically Monday, even after U.S. regulators took extreme measures to backstop all depositors in Silicon Valley Bank before stepping in and shutting down the failing financial institution altogether. The KRE experienced its biggest single-day loss since March 2020, as it fell 12.3 percent.
First Republic raced to the bottom though, tumbling 61.8 percent. The bank's Executive Chairman, Jim Herbert, told CNBC's Jim Cramer that the bank was not seeing large outflows and was conducting business as usual. First Republic also announced Sunday that it had received additional liquidity from both the Federal Reserve and JPMorgan.
Not only did the Fed shut down SVB, but it also closed Signature Bank, one of the main cryptocurrency banks, on Sunday as well while regulators announced additional efforts to stabilize the wider banking system as a whole. One method being used to stabilize the industry is the Fed's Bank Term Funding Program, which will allow financial institutions to exchange specific high-quality assets for cash without booking mark-to-market losses.
While Monday's declines for regional bank stocks showed a lack of faith in the regulators' efforts to stop additional bank runs on the part of investors, there do not appear to have been widespread mass withdrawals from banks in more recent days, according to Daniel Tamayo an analyst with Raymond James.
"Outflows did not accelerate during the last few days, and, in fact, some banks have seen net inflows given movement in deposits from SVB and Signature Bank," Tamayo noted in a letter to clients.
Despite Moody's Investors Service downgrading its outlook on the U.S. banking system from stable to negative, the rally for regional banks has continued to hold.
Meanwhile, Bernie Marcus, co-founder of Home Depot appeared on "Cavuto Live" on Saturday to issue a dire warning to Americans.
"I can't wait for Biden to get on the speech again and talked about how great the economy is and how it's moving forward and getting stronger by the day. And this is an indication that whatever he says is not true. And maybe the American people will finally wake up and understand that we're living in very tough times, that, in fact, that a recession may have already started. Who knows? But it doesn't look good," Marcus said.
"I feel bad for all of these people that lost all their money in this woke bank. You know, it was more distressing to hear that the bank officials sold off their stock before this happened. It's depressing to me. Who knows whether the Justice Department would go after them? They're a woke company, so I guess not. And they'll probably get away with it," Marcus concluded.
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