May 1 (Reuters) - The S&P 500 and the Dow edged higher as JPMorgan shares rose after the lender said it will buy most of First Republic Bank's assets, while investors refrained from making big bets ahead of the Federal Reserve's policy decision this week.
JPMorgan Chase & Co's (JPM.N) shares rose 2.8% on Monday to nearly a two-month high after the deal was announced earlier in the day. The S&P 500 Banks index (.SPXBK) gained 1.4%.
Shares of regional banks PNC Financial (PNC.N) and Citizens Financial (CFG.N) dropped 4.5% and 6.1%, respectively. Big banks such as Bank of America (BAC.N) and Wells Fargo & Co (WFC.N) rose 0.3% and 2.8%, respectively.
The KBW Regional Banking index (.KRX) fell 0.6%.
The rescue comes less than two months after a deposit flight from U.S. lenders Silicon Valley Bank and Signature Bank forced the Fed to step in with emergency measures to stabilize markets.
"When you have the largest bank and probably the most successful bank purchasing First Republic Bank's assets, it shows some confidence in the system and willingness on the part of the government to allow very large players to help stabilize the situation," said Rick Meckler, partner at Cherry Lane Investments.
First Republic's woes kicked off last week on a bleak note, but upbeat earnings from Alphabet Inc (GOOGL.O), Microsoft Corp (MSFT.O) and Meta Platforms Inc (META.O) helped the benchmark S&P 500 (.SPX) notch its second consecutive month of gain on Friday.
Analysts now expect first-quarter earnings for S&P 500 companies to fall 1.9% from a year earlier, compared with a 5.1% fall expected at the start of April, according to Refinitiv data. Apple Inc (AAPL.O) is set to report later this week.
Investors are keenly awaiting the conclusion of the Fed's two-day policy meeting on Wednesday for signs that its aggressive monetary policy tightening is coming to an end soon.
Recent economic data reinforced bets of another 25-basis point interest rate hike, with investors pricing in 90% chances of such a move, according to CME Group's FedWatch tool.
Investors will also focus on Jerome Powell's press conference to assess if the Fed's commentary pushes back market expectations of rate cuts before the year-end amid the recent banking turmoil and threats of an imminent recession.
At 10:08 a.m. ET, the Dow Jones Industrial Average (.DJI) was up 40.97 points, or 0.12%, at 34,139.13, the S&P 500 (.SPX) was up 1.68 points, or 0.04%, at 4,171.16, and the Nasdaq Composite (.IXIC) was down 16.65 points, or 0.14%, at 12,209.94.
Data on Monday showed U.S. manufacturing pulled off a three-year low in April as new orders improved slightly and employment rebounded, but activity remained depressed amid higher borrowing costs and tight credit, raising the risk of a recession this year.
Another set of data showed U.S. construction spending increased more than expected in March.
Norwegian Cruise Line Holdings (NCLH.N) rose 4.8% after raising its full-year profit forecast, betting on higher pricing and pent-up demand from wealthy customers.
General Motors Co (GM.N) gained 3.2% following reports that Morgan Stanley upgraded the stock to "overweight".
Advancing issues outnumbered decliners for a 1.32-to-1 ratio on the NYSE and a 1.27-to-1 ratio on the Nasdaq.
The S&P index recorded 21 new 52-week highs and no new low, while the Nasdaq recorded 48 new highs and 47 new lows.
