Stock Market

Dow suffers worst week since June as U.S. stocks end sharply lower after employment report, banking sector fears

U.S. stocks ended sharply lower Friday as investors parsed mixed signals from the February jobs report amid ongoing concerns about contagion in the banking sector from the troubles at Silicon Valley Bank.

How stocks traded
  • The Dow Jones Industrial Average

    dropped 345.22 points, or 1.1%, to close at 31,909.64, its fourth straight day of declines for its longest losing streak since December.

  • The S&P 500

    fell 56.73 points, or 1.4%, to finish at 3,861.59.

  • Nasdaq Composite

    sank 199.47 points, or 1.8%, to end at 11,138.89.

For the week, the Dow sank 4.4%, S&P 500 dropped 4.5% and the Nasdaq shed 4.7%, according to Dow Jones Market Data. The Dow booked its worst week since June, the S&P 500 saw its biggest weekly percentage decline since September, and the Nasdaq had its biggest percentage slide since November.

What drove markets

U.S. stocks slumped amid investor concerns about the banking sector after the closure of Silicon Valley Bank by the Federal Deposit Insurance Corp and in the wake of the monthly employment report released Friday.

In a sign of investor anxiety, the CBOE Volatility Index

was up Friday afternoon at almost 25, after jumping Thursday, according to FactSet data, last check.

“Bears came out of hibernation this week after waking up to a warning shot from the banking space,” said Adam Turnquist, chief technical strategist for LPL Financial, in emailed comments Friday, pointing to the collapse of Silicon Valley Bank.

Silicon Valley Bank was closed Friday by the California Department of Financial Protection and Innovation. The Federal Deposit Insurance Corp. was appointed receiver, with the bank becoming the first FDIC-backed institution to fail this year.

Read: Bank ETFs fall amid concerns over SVB and ‘crack’ in financial system after rate hikes

The SPDR S&P Regional Banking ETF

was down more than 4% Friday afternoon, FactSet data show, while shares of Bank of America Corp.

closed 0.9% lower, Citigroup Inc.

slid 0.5% and JPMorgan Chase & Co.

rose 2.5%.

Worries over the banking sector are “probably overshadowing” the positive aspects of the employment report, said Karim El Nokali, investment strategist at Schroders, in a phone interview Friday.

The U.S. employment report for February showed the labor market continued to grow at a robust pace last month, with the U.S. economy adding 311,000 jobs, more than the 225,000 that economists polled by the Wall Street Journal had expected.

But “if you dig a little deeper” into the report, average hourly earnings came in “a little lighter than expected” while labor-force participation ticked up, which are positive developments from an inflation standpoint, said El Nokali.

Average hourly wages grew by 0.2%, a slower rate than the 0.3% rate economists had expected. It was also less than the 0.3% increase in January. The unemployment rate ticked higher to 3.6%, helped by an increase in the labor-force participation rate.

“On the margin,” said El Nokali, the employment report was “positive for the equity market.” He said it would “probably argue more” for the Federal Reserve to raise its benchmark rate by 25 basis points at its policy meeting later this month, as opposed to a 50-basis-point hike that investors had been fearing leading up to the employment data.

See: Jobs report shows strong 311,000 gain in February, puts pressure on Fed for bigger rate hike

Fed Chair Jerome Powell said earlier this week that the “totality” of jobs and inflation data would determine whether the central bank would go back to raising its policy interest rate by another 50 basis points at its meeting later in March.

After climbing earlier in the week, odds of a 50-basis-point rate hike by the Fed have moderated over the past 24 hours. Traders now see a 62% chance of the central bank raising its benchmark rate by 25 basis points, according to the CME FedWatch Tool.

Meanwhile, Treasury yields sank Friday.

The yield on the 2-year Treasury note

dropped 31.4 basis points to 4.586%, while the 10-year Treasury yields fell 22.8 basis points to 3.694%, according to Dow Jones Market Data. The Treasury yield curve remains massively inverted, which has contributed to banks’ woes.

Companies in focus

—Steve Goldstein contributed to this report.

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