NEW YORK — Stocks rallied Tuesday, led by the banks most beaten down by the industry’s crisis, and some of Wall Street’s fear washed out on hopes the U.S. government will offer more help if needed.
The S&P 500 jumped 1.3% to lock in its first back-to-back gain since Silicon Valley Bank’s failure two weeks ago. The Dow Jones Industrial Average rose 316 points, or 1%, while the Nasdaq composite jumped 1.6%.
Markets around the world pinballed this month on worries the banking system may crack under the pressure of the fastest set of hikes to interest rates in decades. This week’s rally now runs into a huge test: On Wednesday afternoon, the Federal Reserve is expected to announce another increase to rates.
All the turmoil in the banking industry has traders betting the Fed will stick with an increase of 0.25 percentage point Wednesday.
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The S&P 500 rose 51.30 points to 4,002.87 on Tuesday. The Dow gained 316.02 to 32,560.60, and the Nasdaq climbed 184.57 to 11,860.11.
Stocks also rallied across Europe and Asia.
In the bond market, the yield on the two-year Treasury rose to 4.17% from 3.97% late Monday. The 10-year Treasury yield rose to 3.60% from 3.44%.
People pass the front of the New York Stock Exchange on Tuesday in New York.
Tuesday’s strength for stocks came after Treasury Secretary Janet Yellen told a bankers’ group more government assistance “could be warranted” if risks arise that could bring down the system. That could mean making sure customers at a weakened bank get all their money, even those with more than the $250,000 limit insured by the Federal Deposit Insurance Corp.
Earlier this month, the U.S. government said it would make all depositors at Silicon Valley Bank and Signature Bank whole. They were the second- and third-largest U.S. bank failures in history.
Those banks struggled as depositors rushed to pull their money out en masse — such runs can topple a bank.
First Republic Bank, which shares some similar traits with Silicon Valley Bank, saw its stock lose 90% for the month through Monday. It jumped 29.5% Tuesday.
Other smaller and mid-sized banks also rallied, including a 9.1% climb for Comerica and a 9.3% jump for KeyCorp.
Hopes for the banking industry began to turn over the weekend after regulators pushed together two huge Swiss banks. Shares of both banks rose Tuesday in Switzerland, including a 12.1% jump for acquirer UBS. Credit Suisse rose 7.3% after tumbling a day earlier.
Central banks jacked up interest rates in hopes of getting high inflation under control by slowing the economy. Higher rates hurt prices for stocks and other investments — one of the factors that hurt Silicon Valley Bank, which saw the value of its bond investments drop with the rise in rates.
States Where Inflation Is Driving Increased Reliance on Credit Cards
States Where Inflation Is Driving Increased Reliance on Credit Cards
Photo Credit: Nicola Katie / Shutterstock
Recent data suggests that efforts to tame inflation are starting to have an effect. After nearly a year of steady interest rate increases by the Federal Reserve, year-over-year growth in the Consumer Price Index slowed to 6.0% in February 2023. This figure was the lowest since September 2021.
While inflation might have finally reached its peak, many Americans continue to struggle with high prices. Nominal wages have grown since the start of the COVID-19 pandemic amid the Great Resignation and ongoing labor market tightness, but this rate of growth has trailed the rate of price increases for most workers. This cuts into household budgets and makes it more difficult for consumers to maintain their standard of living.
Price increases since 2000 by major consumer expenditure group
One of the factors that has made the recent run of inflation especially challenging is the fact that the spending categories with the greatest price increases are necessities. Inflation has taken place throughout the economy, but over the last three years, the biggest spikes have occurred in the categories of transportation (+23.8%), food and beverages (+21.5%), and housing (+16.4%). These categories are difficult for households to cut back on, and the rate of inflation for each has exceeded the average 16% price increase across all items.
Stress related to recent inflation decreases with age and income
Faced with these circumstances, U.S. households are feeling the pressure of inflation. More than 90% of adults in every age group express that they feel stressed about recent price increases. The most stressed age group is people aged 18 to 24, who are early in their careers and may not have savings, investments, or credit to fall back on. Inflation-related stress is also a widespread concern across income levels. In every income bracket below $75,000, more than 95% of people report feeling stressed about inflation. Even among the highest earners making above $200,000, more than 80% feel stress about recent price increases.
Nearly 21 percent of people resorted to credit cards to cope with inflation
Consumers are adopting a variety of strategies to cope with the effects of inflation. Most commonly, shoppers look to cut costs: more than two-thirds of adults say they look for lower prices or discounts when making a purchase, more than half are eating out less and delaying major purchases, and nearly half are switching from name brand to generic products.
Inflation has also pushed 21% of adults to use credit cards, loans, or pawnshops to help pay their increased costs. Reliance on credit can be a quick way to help make ends meet in the short term, but doing so can be a risky move financially. People who carry balances on their credit cards or pay off loans slowly will ultimately pay more in interest—a risk exacerbated by the fact that interest rates have risen dramatically.
U.S. households are not turning to credit cards in equal measure, however, as there are geographic differences in where adults have started using cards more frequently. States in the Midwest, like Wisconsin and South Dakota, and in the South, like Georgia and Mississippi, have the fewest adults reporting an increased reliance on credit cards to cope with inflation. In contrast, Western states like Utah, Arizona, Nevada, and California have all seen nearly one in four adults using their cards more often. But one New England state—Maine—sits at the top of the list, with 24.6% of adults reporting an increased reliance on credit cards due to rising prices.
To find the states where inflation is driving increased reliance on credit cards, researchers at Upgraded Points analyzed data collected in early January 2023 from the U.S. Census Bureau’s Census Household Pulse Survey. Researchers ranked states according to each state’s share of adults that increased their use of credit cards, loans, or pawn shops to cope with price increases.
Here are the states where inflation is driving increased reliance on credit cards.
15. Alaska
Photo Credit: Jacob Boomsma / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 21.8%
- Share of adults that relied on credit cards to meet spending needs: 35.0%
- Share of adults stressed about recent price increases: 92.4%
- Share of adults concerned about future price increases: 94.2%
14. Missouri
Photo Credit: Tupungato / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 21.9%
- Share of adults that relied on credit cards to meet spending needs: 34.7%
- Share of adults stressed about recent price increases: 95.6%
- Share of adults concerned about future price increases: 96.7%
13. North Dakota
Photo Credit: Jacob Boomsma / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 22.0%
- Share of adults that relied on credit cards to meet spending needs: 34.4%
- Share of adults stressed about recent price increases: 94.5%
- Share of adults concerned about future price increases: 95.9%
12. Texas
Photo Credit: Ryan Conine / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 22.0%
- Share of adults that relied on credit cards to meet spending needs: 36.7%
- Share of adults stressed about recent price increases: 95.2%
- Share of adults concerned about future price increases: 97.0%
11. South Carolina
Photo Credit: Sean Pavone / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 22.6%
- Share of adults that relied on credit cards to meet spending needs: 32.9%
- Share of adults stressed about recent price increases: 94.2%
- Share of adults concerned about future price increases: 96.8%
10. New Jersey
Photo Credit: FotosForTheFuture / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 22.6%
- Share of adults that relied on credit cards to meet spending needs: 43.4%
- Share of adults stressed about recent price increases: 95.3%
- Share of adults concerned about future price increases: 94.9%
9. New Mexico
Photo Credit: turtix / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 22.7%
- Share of adults that relied on credit cards to meet spending needs: 39.0%
- Share of adults stressed about recent price increases: 93.6%
- Share of adults concerned about future price increases: 95.2%
8. Oregon
Photo Credit: Andrew Zarivny / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 23.0%
- Share of adults that relied on credit cards to meet spending needs: 34.0%
- Share of adults stressed about recent price increases: 92.9%
- Share of adults concerned about future price increases: 95.1%
6. Colorado
Photo Credit: Jacob Boomsma / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 23.4%
- Share of adults that relied on credit cards to meet spending needs: 40.8%
- Share of adults stressed about recent price increases: 93.3%
- Share of adults concerned about future price increases: 94.9%
5. California
Photo Credit: Matt Gush / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 24.0%
- Share of adults that relied on credit cards to meet spending needs: 37.8%
- Share of adults stressed about recent price increases: 94.4%
- Share of adults concerned about future price increases: 95.4%
4. Nevada
Photo Credit: Kit Leong / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 24.4%
- Share of adults that relied on credit cards to meet spending needs: 38.2%
- Share of adults stressed about recent price increases: 95.6%
- Share of adults concerned about future price increases: 94.6%
3. Arizona
Photo Credit: Sean Pavone / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 24.4%
- Share of adults that relied on credit cards to meet spending needs: 38.8%
- Share of adults stressed about recent price increases: 93.4%
- Share of adults concerned about future price increases: 95.7%
1. Maine
Photo Credit: Sean Pavone / Shutterstock
- Share of adults that increased their use of credit cards due to prices: 24.6%
- Share of adults that relied on credit cards to meet spending needs: 37.3%
- Share of adults stressed about recent price increases: 94.4%
- Share of adults concerned about future price increases: 94.5%
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