Stock Market Today: Dow sidesteps fresh bank worries to notch secondweekly gain

By Yasin Ebrahim

Investing.com -- The Dow climbed Friday, notching a second weekly win as banks recovered ground from an early-day slump, while gains in big tech also sparked a broader market rebound.

The Dow Jones Industrial Average rose 0.4% or 132 points, the Nasdaq gained 0.3%, and the S&P 500 added 0.6%.

Bank stocks recovered ground after a steep selloff amid fresh turmoil in the sector following a sell-off in German bank Deutsche Bank (ETR:DBKGn) . Morgan Stanley (NYSE:MS), State Street Corp (NYSE:STT), and Citigroup Inc (NYSE:C) were the biggest decliners, but ended above their lows for the day as Deutsche bank cut some losses. 

The European Central Bank President Christine Lagarde pledged support to the European banking system and German Chancellor Olaf Scholz said there was “nothing to worry about” as the bank is very profitable.

The selloff in the bank sector has pushed it into "deeply oversold" territory, Janney Montgomery Scott said in a note, though flagged the risk of a broader banking crisis.

“[F]rom a macro standpoint, and based on our technical work in global money flows- what we believe may be unfolding here is not a localized regional banking crisis, but a broader central banking crisis,” it added.

Big tech pared losses to end mostly in the green, with Meta Platforms (NASDAQ:META) and Microsoft Corporation (NASDAQ:MSFT) leading to the upside. 

Activision Blizzard Inc (NASDAQ:ATVI) shares jumped more than 5% as its $75 billion sale to Microsoft overcame a major hurdle after the UK competition regulator dropped a key concern about the deal.

The UK Competition and Markets Authority pointed to “new evidence” on Friday, and said it no longer believes the deal poses a risk of “substantial lessening of competition.”

Consumer discretionary stocks were also weighing on the broader market, paced by travel and leisure stocks, with Hilton (NYSE:HLT) and Marriott International Inc (NASDAQ:MAR) down more than 2%, while Carnival (NYSE:CCL) gained less than 1%.

The gain in Carnival comes ahead of the cruise line’s quarterly results due Monday that are expected to “elicit a positive reaction from the stock, based primarily on weakening sentiment heading into the print,” Deutsche Bank said in a recent note.

Block (NYSE:SQ), meanwhile, was down almost 2% following a more than 14% slump a day earlier as short seller Hindenburg Research’s allegations of fraud against the digital payment company continued to weigh.

But even as the stocks turned green and added to gains, jitters in the market persist as defensive sectors including consumer staples and utilities were in the ascendency.

The second weekly gain in the broader market followed a volatile week during which the Federal Reserve lifted rates by 0.25% and signaled further tightening ahead. But investors continue to bet on a sooner rather later pause as inflation is likely to slow faster than expected. 

"We do expect the Fed to go on hold post this week’s 25 basis point hike&expect inflation to decline markedly in the next few months...given easy year-on-year comps while falling shelter prices should sustain declining inflation in the second half of the year,"  Jay Pelosky, TPW Advisory Founder and Principal said in a note.