The recovery of shares of US regional banks raises Wall Street shares

Regional U.S. bank stocks led a rally on Wall Street on Friday, but government bond prices tumbled after strong jobs data revived fears that the Federal Reserve could keep interest rates higher for longer.

Shares in PacWest and Western Alliance rose 83 percent and 38 percent, respectively, in New York after falling sharply in the previous session on renewed concerns about the health of the sector.

After Thursday’s sell-off, the S&P 500 on Wall Street rose 1.4 percent. The Nasdaq Composite-heavy index rose 1.8 percent, with Apple rising 4.8 percent after first-quarter revenue and the computer maker’s profit fell less than analysts’ expectations. The KBW Regional Banking Index rose 4.6 percent, reversing losses in the previous session.

With banking stocks flat, monthly data showed that the US economy added 253,000 jobs in April, far more than the 180,000 expected by economists polled by Reuters. The unemployment rate fell to 3.4 percent, down from a 50-year low of 3.5 percent. Economists had expected a slight increase, to 3.6 percent.

Investors have been watching the numbers for signs of a slowdown in the US economy, which has raised doubts about whether the Federal Reserve will start cutting interest rates as soon as expected.

Richard Flynn, managing director at Charles Schwab UK, said the strong numbers would only add to concerns that “the US economy is likely still too hot in the Fed’s eyes.”

US government debt sold off sharply, with the yield on the two-year interest rate-sensitive Treasury note rising 0.21 percentage point to 3.93 percent.

In Europe, the region-wide Stoxx Europe 600 advanced 1.1 percent, and the London-based FTSE 100 advanced 1 percent. The pound strengthened 0.6 percent against the dollar, to $1.265, its highest level since May last year.

Germany’s DAX rose 1.4 percent, propelled by an 8.9 percent gain for sportswear maker Adidas, even after figures showed German factory orders fell 10.7 percent in March from the previous month, a much bigger drop than economists had expected. That raised concerns about a sharp slowdown in Europe’s largest economy.

The European Central Bank on Thursday raised interest rates by a quarter of a percentage point, slowing from previous increases, but warned that the fight against inflation was not yet victorious. The European Central Bank’s main deposit rate rose from 0.5 percent to 3.25 percent in 11 months, the fastest tightening cycle on record.

Some analysts believe that prices are near peak levels. “Despite the resilience of the eurozone banking sector, the US experience warrants caution,” said Frederic Ducrozet, head of macroeconomic research at Pictet Wealth Management. “We expect the ECB to stop raising interest rates by summer.”

In commodities markets, the price of crude oil rose 3.6 percent to $75.08 a barrel, while its US counterpart, West Texas, added 3.8 percent to $71.13 a barrel.