Markets were remarkably quiet following the second-biggest bank failure in U.S. history. The major indexes lost ground, but only marginally.
The Dow Jones Industrial Index declined 0.14%, the S&P 500 was essentially unchanged, and the Nasdaq Composite edged lower by 0.11%.
One reason was that First Republic's failure — and takeover by a bigger bank — was not unexpected. An intervention of some sort, in fact, seemed obvious ever since First Republic reported last Monday it had lost 40% of its deposits in the first quarter, while its net interest income dropped 30% year over year. That sort of numbers simply aren't sustainable.
Thus, JPMorgan's takeover of First Republic didn't come as a shock, but as a relief. First Republic was akin to a wound that wouldn't close, creating uncertainty even as the rest of the banking sector tried to recover from the failures of SVB and Signature Bank.
Now, however, "the wall of worry may ease," said Wells Fargo banking analyst Mike Mayo in a note to clients. "Resolving FRC should end the 7-week post SVB bank crisis phase."
(Though, to present a contrary perspective, Gary Cohn, former chief operating officer at Goldman Sachs, told CNBC, "This is not the end" for troubles in the banking world.)
Another reason for the hesitation in markets is the Federal Reserve meeting this week. The takeover of First Republic may help to stabilize the health of regional banks, which made investors increase their bets that the Fed will raise interest rates by a quarter percentage point. And markets dislike making big moves prior to a Fed meeting.
Last, investors are waiting on Apple to report quarterly results on Thursday.
"Apple is going to be crucial," said Quincy Krosby, chief global strategist at LPL Financial, who added that "it gives you perspective on global demand. Apple is in so many portfolios in so many different sectors. Obviously, it's extremely important, probably the most important of all the big-tech earnings."
In sum: First Republic's failure and takeover by JPMorgan is a big deal (and good one for the biggest bank in the U.S.!) — but it probably matters more to JPMorgan than to investors keeping an eye on broader market moves.
