- US job growth beats expectations, wage growth slows
- Bank stocks fall as Jungonels underperforms
- California regulator shuts down SVB after failed capital raise
- JPMorgan won Wells Fargo, signing the Republican first plunge
- Indices falling: Dow 1.07%, Standard & Poor’s 1.45%, Nasdaq 1.76%
March 10 (Reuters) – Wall Street indexes closed more than 1% lower on Friday after investors sought to exit fearing for the health of U.S. banks after the failure of a high-profile lender to the technology sector overwhelmed February jobs. a report.
California banking regulators said they shut down SVB Financial Group (SIVB.O) to protect deposits in what was the biggest bank failure since the financial crisis. SVB’s capital crisis had already put pressure on bank stocks globally.
SVB tried but failed to shore up its balance sheet with a proposed share sale late Wednesday. On the same day, cryptocurrency lender Silvergate Capital (SI.N) said it would have to step back after heavy losses from the collapse of cryptocurrency exchange FTX.
“There are concerns about cracks in the financial system as a result of interest rate hikes by the Federal Reserve,” said Carol Schliffe, chief investment officer, BMO Family Office in Minneapolis. “The fear is whether it is broader than the bank of one industry and one segment of the economy.”
And while many investors are looking at their bank holdings for signs of risk, Schleif said much of the weakness in regional bank stocks stems from the “proverbial shoot-it-and-questions-first-later.”
The KBW Regional Banking Services Index (.KRX) ended the session down 2.4% while the S&P 500 Financials Index (.SPSY) lost 1.8%.
Schleif and other investors said they hoped the regulations added to the US banking system since the 2008 financial crisis would prevent a similar disaster.
But she said that “people are still very nervous because they don’t want a repeat.”
The Dow Jones Industrial Average fell 345.22 points, or 1.07%, to 31909.64 points, the Standard & Poor’s 500 lost 56.73 points, or 1.45%, to 3861.59 points, and the Nasdaq Composite Index fell 199.47 points, or 1.76%, to 11138.89.
All 11 industry sectors of the S&P 500 declined. The real estate sector (.SPLRCR), down 3.3%, led the decline while the best-performing consumer goods (.SPLRCS), fell just 0.5%.
Over the course of the week, the S&P lost 4.6% in its biggest weekly percentage decline since September, but was holding on to a slim year-to-date gain of 0.6%. The Dow Jones fell 4.4% for the week and is down more than 3% year-to-date, while the Nasdaq is down 4.7% this week, but is up more than 6% in 2023.
The Cboe Volatility Index (.VIX), an options-based index that reflects demand for protection from stock market declines, closed at a 3-month high, up 2.19 points at 24.9 after touching a nearly five-month high during the session.
Mixed jobs report
Investors were expecting to end the week with most of them focusing on economic data rather than banks.
Before the market opened, the closely watched non-farm payrolls report showed that the US economy added more jobs than expected in February while average hourly earnings rose a slower 0.2% last month after vs. 0.3% in January while unemployment rose to 3.6%. .
The data eased some concerns that the Federal Reserve could raise interest rates by 50 basis points at its March meeting after hawkish comments from Fed Chair Powell this week.
John Bravin, managing director and chief information officer at Paleo Lion in Princeton, New Jersey, said investors were more focused on the uncertainties surrounding the banking system.
“Whatever positive sentiment came out of the labor market report, the negative sentiment is from the SVB position,” Praveen said.
The banking sub-sector of the S&P 500 (.SPXBK) closed 0.5% lower supported by JPMorgan Chase (JPM.N), which closed 2.5% higher and Wells Fargo (WFC.N), which closed 0.6% higher while the rest of the index lost ground.
The biggest losers were Silvergate Crito Signature Bank (SBNY.O), which fell 22.9% and regional bank First Republic (FRC.N), which ended 14.8% lower.
In individual stocks, Gap Inc (GPS.N) lost 6.3% after the apparel retailer posted a bigger-than-expected loss in the fourth quarter and forecast full-year sales that fell short of Wall Street estimates.
Oracle Corp (ORCL.N) fell 3% after the software company missed third-quarter revenue estimates.
Low issues outnumbered high issues on the NYSE by a ratio of 4.75 to 1; On the Nasdaq, the ratio was 4.31 to 1 in favor of declining stocks.
The S&P 500 has yet to post 52-week highs and 40 new lows; The Nasdaq index posted 25 new highs and 493 new lows.
15.17 billion shares changed hands on US exchanges, well above the average of 11.13 billion shares for the last 20 sessions.
(Covering) By Sinad Karo and Saqib Iqbal Ahmed in New York, Amruta Khandekar and Shristi Achar in Bengaluru Editing by Vinay Dwivedi and David Gregorio
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