LDN - Business

Futures mixed as SVB extends rout, payrolls data on tap

[March 10, 2023] By Amruta Khandekar and Shristi Achar A

(Reuters) -U.S. stock index futures were mixed on Friday after SVB's plans to raise funds stoked balance-sheet concerns and pummeled the banking sector, while investors awaited a key jobs report for clues on the Federal Reserve's monetary policy path.

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.

Shares of SVB were down 44% in premarket trading on Friday, after slumping about 60% in the previous session, with investors concerned about the strength of its balance sheet.

Big U.S. banks JPMorgan Chase & Co, Citigroup and Morgan Stanley pared some declines, but were down between 0.1% and 0.2%.

"(The issue) is more idiosyncratic to SIVB. But investors tend to sell everything that's in that sector just to get out of it, "said Paul Nolte, senior wealth advisor and market strategist at Murphy & Sylvest.

All three major U.S. indexes are headed towards weekly losses after hawkish messages from Fed Chair Jerome Powell stoked fears that the central bank would shift back to a large rate hike at its March meeting after having dialed down the size of its rate increases a month ago.

Traders' bets currently are split nearly equally between a 25 bps and a 50 bps rate hike at the Fed's March meeting, with rates seen peaking at 5.48% in July..

After a sharp rise in jobless claims last week raised hopes of the Fed likely softening its policy stance, all eyes are now on the non-farm payrolls data due at 8:30 am ET, which is expected to show slower U.S. job growth last month, with the unemployment rate staying at a more than five-decade low.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 6, 2023. REUTERS/Brendan McDermid

The reading is likely to show nonfarm payrolls grew by 205,000 jobs in February, less than half of the eye-popping 517,000 additions in January. The unemployment rate is forecast to stay unchanged at 3.4%, the lowest since May 1969.

"If you're looking at the weekly jobless claims numbers, you should argue for a little bit weaker jobs report. But, there's really no reason for the Fed if they're data dependent to step away from their rate hiking regime," said Nolte.

At 7:27 a.m. ET, Dow e-minis were down 64 points, or 0.2%, S&P 500 e-minis were down 4 points, or 0.1%, and Nasdaq 100 e-minis were up 12.5 points, or 0.1%.

Among other stocks, Gap Inc fell 7.2% in premarket trading after the apparel maker posted a bigger-than-expected fourth-quarter loss and forecast full-year sales below Wall Street estimates, signaling a slowdown in demand.

Oracle Corp slid 4.3% after the software firm missed third-quarter revenue estimates, while Caterpillar Inc slipped 1.6% after UBS downgraded the equipment maker to "sell" from "neutral".

DocuSign dropped 13.4% as the digital document signing tool provider forecast first-quarter revenue below estimates and announced its chief financial officer's exit.

(Reporting by Amruta Khandekar and Shristi Achar in BengaluruEditing by Vinay Dwivedi)

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