U.S. stocks plunged on Friday as investors became uneasy following the shocking bankruptcy of Silicon Valley Bank (SIVB) and a vital jobs report that came in warmer than anticipated.
While the Dow Jones Industrial Average (DJI) fell 1.1%, the S&P 500 (GSPC) fell 1.4%. Contracts on the heavily tech-focused Nasdaq Composite (IXIC) fell 1.8%. The Friday declines made for an even worse week for Wall Street. Since at least November, all three indices saw their worst weeks.
The jobs data and Silicon Valley Bank’s ongoing tale, which made it the biggest financial institution to fail since the 2008 financial crisis, were the two key financial events that Wall Street processed on Friday.
The U.S. economy added 311,000 jobs in February, a slower rate than the staggering total for January, but still exceeding consensus analyst projections of 225,000 job additions. This resulted in another blowout of expectations for the labour market on Friday. The unemployment rate increased slightly to 3.6%, and pay growth increased by 4.6% annually, slower than anticipated.
Just return to the fundamentals. Without a doubt, the labour markets are robust. Nonfarm payrolls have averaged 351,000 over the past three months, according to Neil Dutta, Head of Economics at Renaissance Macro Research.
This year, there had been an average of 442,000 more people working full-time. I can understand why the soft-landing bulls are jumping on today’s report given the rise in the participation rate and the deceleration in wage growth (primarily a composition issue), especially given the setup coming in. However, let’s state the obvious: the Fed still has work to do. The cost of terminals is still rising. Oh, and it’s time to quiet those who are discussing the weather, the approaching recession, and labelling the no-landing story a fraud, he said.
According to the Bureau of Labour Statistics, employment increased noticeably in the sectors of leisure and hospitality, retail trade, government, and health care, while information, transportation, and warehousing had a decline.
As the Federal Reserve works to reduce inflation, it has been closely monitoring all aspects of the labour market. Even while other recent government data indicates that the economy is slowing down, February’s job report showed that hot hiring trend was still going strong. The payrolls release was anticipated by economists as a report that would reveal if the hiring increase was an anomaly or the beginning of an economic acceleration.
The question of whether the Fed would raise interest rates by 0.25% or 0.50% at its March meeting has come up as a result of the accumulating economic data and statements made this week by Chair Jerome Powell.
Market investors are betting that the Federal Reserve will raise interest rates by a quarter-point at its upcoming meeting, according to the CME FedWatch tool.
However, given that the banking sector is under stress as a result of the Fed’s monetary tightening policies, recent events in the banking world have given rise to other worries for Fed policymakers.
U.S. bank regulators took over Silicon Valley Bank on Friday after the lender’s attempts to obtain new capital were unsuccessful. In light of the Silicon Valley Bank situation, Treasury Secretary Janet Yellen stated on Friday that she is keeping an eye on a “few banks.”
Before trading was stopped on Friday morning, the share price of the bank fell 68%.
Markets are experiencing a downturn as the KBW Bank index (BKX) dropped by almost 4%, while index constituents Bank of America (BAC) and JPMorgan Chase (JPM) recovered by about 1% and 3%, respectively.
Other regional bank stocks fell as well, including First Republic Bank (FRC), PacWest Bancorp (PACW), Western Alliance Bancorp (WAL), and Signature Bank (SBNY), which fell by 15%, 38%, 21%, and 23%, respectively.
Other single-stock swings included a 47% decline in Allbirds (BIRD) shares following the footwear retailer’s dismal quarterly results announcement, which also showed a double-digit decline in sales and a $101 million yearly deficit. Additionally, there is a change in leadership as Chief Financial Officer Mike Bufano is departing the organisation.
Shares of DocuSign (DOCU) fell 23% after JPMorgan analysts downgraded the stock, citing unimpressive demand expectations. Despite exceeding expectations for earnings and sales, CFO Cynthia Gaylor stated that she would be retiring this year.
In other cryptocurrency market news, Silvergate Capital (SI) was liquidated, and regulatory pressure on the sector caused Bitcoin (BTC-USD) to fall below $20,000 on Friday.