Wall St sinks on jitters about banks after mixed jobs report
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[March 11, 2023] By
Sinéad Carew and Amruta Khandekar
(Reuters) - Wall Street's indexes ended down more than 1% on Friday
after investors ran for the exits as they feared for the health of U.S.
banks after the failure of a high-profile lender to the technology
sector, overshadowing the February jobs report.
California banking regulators said they closed SVB Financial Group to
protect deposits in what was the largest bank failure since the
financial crisis. A capital crisis at SVB had already put pressure on
bank stocks globally.
SVB had tried but failed to shore up its balance sheet through a stock
sale proposed late on Wednesday. The same day, crypto-lender Silvergate
Capital said it would have to wind down after huge losses from the FTX
cryptocurrency exchange collapse.
"There's concern cracks may be appearing in the financial system as a
result of the Federal Reserve's aggressive rate hikes," said Carol
Schleif, chief investment officer, BMO family office in Minneapolis.
"The fear is whether it's broader than one industry's bank and one
segment of the economy."
While many investors looked through their bank holdings for signs of
risk, Schleif said much of the weakness in regional bank stocks stemmed
from a "proverbial shoot first ask questions later situation."
The KBW regional banking index ended the session down 2.4% while the S&P
500 financials index lost 1.8%.
Schleif and other investors said they hoped regulations added to the
U.S. banking system since the 2008 financial crisis would prevent a
similar catastrophe.
But still "people are very nervous because they don't want a repeat,"
she said.
The Dow Jones Industrial Average fell 345.22 points, or 1.07%, to
31,909.64, the S&P 500 lost 56.73 points, or 1.45%, to 3,861.59 and the
Nasdaq Composite dropped 199.47 points, or 1.76%, to 11,138.89.
All 11 S&P 500 industry sectors lost ground. Real estate, down 3.3%, led
declines while consumer staples the top performer, fell just 0.5%.
For the week, the S&P lost 4.6% in its biggest weekly percentage decline
since September but was clinging to a tiny year-to-date gain of 0.6%.
The Dow fell 4.4% for the week and was down more than 3% year-to-date
while the Nasdaq declined 4.7% this week but was up more than 6% for
2023.
The Cboe Volatility Index, an options-based indicator that reflects
demand for protection against stock market declines, closed at a 3-month
high, up 2.19 points at 24.9 after touching a roughly five-month high
during the session.
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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
MIXED JOBS REPORT
Investors had expected to end the week with most of their focus on
economic data rather than banks.
Before the market opened, the closely monitored non-farm payrolls
report showed the U.S. economy added more jobs than expected in
February while average hourly earnings rose at a slower 0.2% last
month after versus 0.3% in January while unemployment rose to 3.6%.
The data had eased some concerns that the Fed could raise rates by
50 basis points at its March meeting after hawkish remarks from Fed
Chair Powell this week.
But investors were more focused on uncertainties around the bank
system, said John Praveen, managing director & Co-CIO at Paleo Leon
in Princeton, New Jersey.
"Whatever positive vibes came out of the labor market report were
upstaged by negative vibes from the SVB situation," Praveen said.
The S&P 500's bank subsector closed down 0.5% with a boost from
JPMorgan Chase, which closed up 2.5% and Wells Fargo , which closed
up 0.6% while the rest of the index lost ground.
The biggest decliners were Silvergate cryto-bank peer Signature
Bank, which tumbled 22.9% and regional bank First Republic, which
finished down 14.8%.
In individual stocks, Gap Inc lost 6.3% after the apparel retailer
posted a bigger-than-expected fourth-quarter loss and forecast
full-year sales below Wall Street estimates.
Oracle Corp slid 3% after the software firm missed third-quarter
revenue estimates.
Declining issues outnumbered advancing ones on the NYSE by a
4.75-to-1 ratio; on Nasdaq, a 4.31-to-1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 40 new lows; the Nasdaq
Composite recorded 25 new highs and 493 new lows.
On U.S. exchanges 15.17 billion shares changed hands, well above the
11.13 billion average for the last 20 sessions.
(Reporting by Sinéad Carew 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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