Stores Thurs tumbled Banks and other financial stocks also sold off, and investors braced for Friday’s key payroll report that could shape the direction of interest rates.
The S&P 500 fell 1.85%, closing at 3918.32, while the Dow Jones Industrial Average fell 543.54 points, or 1.66%, to settle at 32254.86. The Nasdaq Composite fell by 2.05%, closing at 11,338.35.
Thursday’s losses caused the Dow to close below its 200-day moving average for the first time since November 9th. For the week and the year, the 30-share index is down 3.4% and 2.7%, respectively. The S&P and Nasdaq are up 2.05% and 8.33% in 2023, respectively, but are on track for weekly losses of 3% or more.
SVB Financial exploded 60% after announcing a $1.75 billion share sale, pushing its market value just over $6 billion and another dip. Names of regional banks. Shares of Silvergate fell more than 42% after news that it was closing operations.
“The Fed changed the narrative that drove stocks higher for most of January and the end of December,” said Adam Sarhan, CEO of 50Park Investments. “The market has rebounded on the assumption that the Fed will stop raising interest rates, pausing in the summer — or sometime in the near future. That’s not quite the case,” Powell made clear.
There is no data to suggest the Fed should stop raising interest rates, Sirhan said, adding that many investors are selling the jobs report to reduce their risk, finding value in less risky assets such as bonds that offer an attractive yield.
“The market is looking for an upside catalyst and can’t find it,” he said.
Investors received more news on the state of the labor market ahead of Friday’s closely watched non-farm payrolls report. Claims for unemployment benefits for the week ending March 4 rose more than expected, indicating that the labor market may begin to slow down. Later, Wednesday’s ADP jobs report and JOLTS data suggested a resilient economy, adding to concerns that the Fed needs more hiking to slow it down.
Some economists, including those at Citi, are expecting a positive surprise on the upside with the release of payroll data on Friday, after a blowing number for January. Strong job growth could mean bad news for the market, Alex Saunders, a research analyst at Citi, wrote in a note Wednesday to clients.
“Given that good news is bad news for the markets, we think this has the potential to cause more stock selling and support the case for a massive Fed hike,” Saunders said.
Thursday’s moves come a day after Powell repeated his warning message to lawmakers that the central bank may raise interest rates higher than previously expected. While the Fed chairman confirmed that no decision has been taken on the March meeting, traders are bracing for a larger-than-expected rally after a batch of strong economic data in recent weeks.
As of Thursday afternoon, traders were bidding for a probability of approximately 61%, up 50 basis points, according to CME Group’s FedWatch tool.
Lea la cobertura del mercado de hoy en español aquí.