Regional Banks Give Up Early Gains; Stock Indices Remain Stable

On Monday, the major stock indexes were little changed due to another slide in regional-bank stocks and data indicating tightening lending conditions. Shares of smaller lenders experienced an early spike due to a dividend cut from PacWest Bancorp that boosted investors' confidence in its survival. While PacWest added around 3.7% for the day, the broader gains were undone by a volatile session, leaving the KBW Nasdaq Regional Banking Index down 2.8%.

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However, the indexes were buoyed by gains in some large technology firms, with communication-services companies leading the S&P 500. Megacap tech companies have been driving the stock market's gains this year, outperforming the broader index by 23 percentage points, according to Goldman Sachs research.

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The S&P 500 gained less than 0.1%, while the Dow Jones Industrial Average lost 56 points, or 0.2%. The Nasdaq Composite added 0.2%, pushing the tech-heavy index up 20% from its 2022 low and into bull market territory.

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The swings in regional-bank stocks followed PacWest's dividend cut late Friday, which investors expect will boost its capital buffers and aid confidence in its survival odds. However, concerns over the lending environment and a potential recession have hammered regional-bank stocks, sending them down 11% in May.

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The Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices, released Monday afternoon, showed credit conditions continued to deteriorate in the first quarter, adding to concerns about lending.

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Investors are now awaiting this week's release of the consumer-price index to see if inflation is continuing to fall in light of the Fed's decision last week to signal a potential pause in interest-rate increases.

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Oil prices rose on Monday, regaining some ground after a third consecutive weekly loss, with Brent crude, the international benchmark for oil, adding 2.3% to $77.01 a barrel.

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Overseas, the Stoxx Europe 600 Index added 0.3%, while the Japanese Nikkei index shed 0.7% and the Shanghai Composite Index advanced 1.8%.

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