U.S. stock indexes fell on Friday as bank shares extended their slide after SVB Financial’s efforts to raise capital fueled concerns about the sector’s health, while signs of a cooling labor market eased some rate-hike jitters.
Wall Street’s main indexes recorded steep losses in the previous session after startups-focused lender SVB Financial Group’s share sale to shore up its balance sheet wiped out more than $80 billion in value from bank shares.
Trading in shares of SVB, whose efforts to raise money have failed according to a CNBC report, was halted on Friday after they fell more than 40% before the bell. The bank is in talks to sell itself, the report added.
Among major S&P 500 sectors, financials dropped 2.8% while the banks sub-index lost 4.2%.
The closely watched non-farm payrolls report showed the U.S. economy added jobs in February, average hourly earnings rose 0.2% last month after gaining 0.3% in January, while the unemployment rate rose to 3.6%.
The data had been a focus area for markets concerned about aggressive interest rate hikes after Fed Chair Jerome Powell’s hawkish remarks earlier this week, as any cooling in the labor market could persuade the Fed to ease their monetary policy approach.
Traders are now pricing in a 28% chance of a 50-basis-point hike from the Fed this month, compared with a 50% chance before the numbers were released.
A separate report on Thursday showed a sharp rise in jobless claims, which had also buoyed hopes of the Fed softening its monetary policy stance.
“The headline (payrolls) number beat expectations, but the details are what’s much more important and perhaps encouraging to those who think that the Fed doesn’t need to do a 50 basis point hike,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.
“There’s not a lot of evidence that wages are spiralling out of control. It means that maybe the Fed would be comfortable doing 25 basis points at their next meeting.”
All three major U.S. indexes were headed towards weekly losses as Fed Chair Jerome Powell earlier this week left open the possibility of a large rate hike at the Fed’s March meeting, after the central bank dialed down the size of its rate hike last month.
At 9:46 a.m. ET, the Dow Jones Industrial Average was down 156.67 points, or 0.49%, at 32,098.19, the S&P 500 was down 34.26 points, or 0.87%, at 3,884.06, and the Nasdaq Composite was down 146.50 points, or 1.29%, at 11,191.86.
Among other stocks, Gap Inc fell 6.5% after the apparel maker posted a bigger-than-expected fourth-quarter loss and forecast full-year sales below Wall Street estimates.
Oracle Corp slid 3.6% after the software firm missed third-quarter revenue estimates, while Caterpillar Inc slipped 1.4% after UBS downgraded the equipment maker to “sell” from “neutral”.
DocuSign dropped 20.4% as the digital document signing tool provider forecast first-quarter revenue below estimates and announced its chief financial officer’s exit.
Declining issues outnumbered advancers by a 3.33-to-1 ratio on the NYSE and by a 3.88-to-1 ratio on the Nasdaq.
The S&P index recorded no new 52-week highs and 27 new lows, while the Nasdaq recorded 12 new highs and 294 new lows.
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