On Friday, the stock market experienced a significant downturn, with the Dow Jones Industrial Average down by 1.7%, the S&P 500 declining by 0.4%, and the Nasdaq declining by 0.1%.
These declines are primarily due to the February jobs report, which fell short of expectations. Moreover, the market is in turmoil due to the emergency capital raise in Silicon Valley, which has triggered a massive sell-off of fintech stocks.
On Thursday, the S&P financial sector took a big hit, falling by 4%, the worst since 2020. The Small Cap Russell 2000 index also lost 2.7% to hit 1,828. The drop in the financial sector is mainly due to concerns about the rising bond yields, which could lead to increased borrowing costs for businesses.
Heavy Selling in US Banking Sector
SVB Financial Group’s stock fell by 61% after announcing a $1.75 billion stock sale following losses of over $18 billion due to the sale of securities worth $211 billion and a decline in customer deposits.
Bank of America and Wells Fargo also saw their shares drop by 6%, and SVB Financial Group lost an additional 42% in premarket trading. The heavy selling in the US banking sector is causing concern for investors.
James Hughes, an analyst at Scope Markets, warns that Wall Street is in trouble due to fears of robust sectors, rising rates by the Fed, and shrinking customer confidence. On Thursday, the four biggest banks lost a combined $50 billion.
As Friday continues, investors are bracing for further declines, but the upcoming NFP data release may bring some relief to the markets. The data expected for Friday is the job report, which will show a massive increase in jobs by over 205,000 to 5,117,000 in February.
Job Report Results and Market Implications
James Hughes also notes that if the job report comes in too hot, the Fed will see it as validation for their current work with rate hikes, but if it is too low, he believes that the damage is already done.
He warns that it could be a very disorderly end to the week after the slump in unemployment, and the participation rate will be closely monitored from the data released today.
While the rate is increasing, it is still below pre-pandemic levels, and a sluggish job report will not have a big effect on bringing down the high number of job vacancies. Spring might be around the corner, but the storm in the financial and stock markets is just starting.
In other news, the initial jobless claim for last week came in at 211,000, representing a 12-week high. This number increased from 192,000 in the previous week, with investors expecting a consensus of 195,000.