Dow closes up nearly 100 points at new record, shrugging off fallout from margin-call rout

Wall Street points to a lower open after Friday's late-day bounce
Wall Street points to a lower open after Friday's late-day bounce

The Dow Jones Industrial Average rose to a new record on Monday despite weakness in bank stocks caught in the downdraft of Friday's margin call.

The Dow erased a 160-point loss and closed up 98 points at a fresh record of 33,171. The S&P 500 fell 0.09% to 3,971 after falling as much as 0.8% earlier. The Nasdaq Composite slipped 0.6% to 13,059.

Shares of ViacomCBS and Discovery swung between losses and gains after intense selling pressure last week. The two companies were believed to be hit by forced liquidation of positions held by the multibillion dollar family office Archegos Capital Management, a source familiar with the situation told CNBC.

Discovery lost 1.6%, while ViacomCBS dropped 6.7%. The two companies had lost 27% apiece during Friday's selloff.

Elsewhere, Boeing gained 2.3% on news that Southwest Airlines had added 100 orders for the airliner's 737 Max jet. The first 30 jets are scheduled for delivery in 2022.

Credit Suisse shares tumbled 11.5% as the bank warned it would face a "significant" hit to its first-quarter results due to the bank having to exit hedge fund positions related to the forced selling. Nomura also warned that it could get hit, sending its shares down 14%.

Bank stocks weighed on the Dow industrials, with Morgan Stanley dropping 2.6% and JPMorgan Chase off 1.6%. The weakness came as government bond yields edged higher to start the week.

Though stocks were taking a hit from the Archegos stumble, the situation is unlikely to have lasting impacts on the broader market, according to Bespoke Investment Group.

"While other funds may be caught in the mess, we fail to see how this specific car crash of a trade ends up propagating across the financial system via counterparty default," Bespoke said in its morning note. However, the firm did caution that investors should "get used to the GMEs and Archegos of the world, because they seem to be happening with more frequency even if their fall-out is contained."

On Friday, all three major benchmarks rallied to their session highs into the close with the blue-chip Dow closing about 450 points higher. The S&P 500 eventually climbed 1.7% to hit a record closing high. The Nasdaq Composite wiped out a 0.8% loss and ended Friday 1.2% higher.

Traders are bracing for heightened volatility during this holiday-shortened week with quarter-end rebalancing among pension funds and other big investors. The recent swift advance in bond yields could set up money managers for big adjustments in their portfolios.

The Dow and the S&P 500 have risen 7.2% and 4.2%, respectively, so far in March. The tech-heavy Nasdaq, however, has dipped 1% this month as some investors jumped high-flying technology names amid rising yields.

Investors are awaiting updates from President Joe Biden about his infrastructure plan which could cost north of $3 trillion. The president is expected to unveil his plan when he travels to Pittsburgh on Wednesday and also detail how it would be paid for. White House press secretary Jen Psaki said Sunday Biden plans to roll out two packages in the coming months, the first covering infrastructure and the second covering health and family care.

"The market isn't placing very high odds on this infrastructure/tax blueprint coming to fruition and while Biden probably won't get everything he's asking for, Congressional Democrats and the White House are VERY intent on passing some substantial bills in the coming months," Adam Crisafulli, founder of Vital Knowledge, said in a note.

The stock market is closed for the Good Friday holiday, but the March jobs report is still slated for release that morning. Economists expect 630,000 jobs were added in March, and the unemployment rate fell to 6% from 6.2%, according to Dow Jones.