Wall St falls on bank stocks fall, jobs report tremors

March 9 (Reuters) – Wall Street’s three major stock indexes closed lower on Thursday, with banking stocks making the biggest move, while investors also worried that Friday’s jobs report could spur more aggressive rate hikes by the Federal Reserve.

The S&P 500’s banking index (.SPXBK) ended down 6.6% after hitting its lowest level since mid-October. Investors fled the sector after technology industry lender SVB Financial Group ( SIVB.O ) launched a share sale to shore up its balance sheet due to falling deposits from startups struggling for funding.

The Nasdaq ended down more than 2% while the benchmark S&P 500 and Dow lost close to 2%.

Investors also jostled ahead of Friday’s US non-farm payrolls report for February with expectations of big wage increases fueling inflation concerns. Fed Chairman Jerome Powell this week exacerbated concerns about upcoming interest rate hikes aimed at combating stubbornly high inflation.

Traders bet the odds of a 50-basis-point rate hike at the Fed’s March meeting were around 60%, according to CME Group’s FedWatch tool, up sharply from a 31% probability before Powell’s Tuesday and Wednesday congressional appearances.

“There’s a lot of anticipation around tomorrow’s jobs report. We’re going to get a flurry of data over the next week and a half,” said Mona Mahajan, senior investment strategist, Edward Jones, New York, also citing inflation and retail sales reports that all due out before the next Fed meeting, which ends on March 22.

Earlier on Thursday, Labor Department data showed that initial claims for state unemployment benefits rose by 21,000 to a seasonally adjusted 211,000 for the week ended March 4, compared with economist forecasts for 195,000 claims.

While last week’s increased jobless claims may be “the first sign that the labor market may be showing signs of loosening,” Mahajan wants to see “more data points to establish a trend.”

The February non-farm payrolls report is expected to show a 205,000 increase in wages after January’s blowout of 517,000, which had already led markets to brace for a bigger rate hike in the US.

Any evidence that last month’s “giant payrolls number was not an anomaly” would serve to “amplify the market’s concerns about the Fed’s response to it,” said Mark Luschini, investment strategist at Janney Montgomery Scott in Philadelphia.

And with February wage increases expected to rise 4.7% compared with January’s 4.4%, “it feels like it’s ticking in the wrong direction even if we’re just meeting expectations,” said Mahajan who will be watching the wages data closely.

The Dow Jones Industrial Average (.DJI) fell 543.54 points, or 1.66%, to 32,254.86, the S&P 500 (.SPX) lost 73.69 points, or 1.85%, to 3,918.32 and The Nasdaq Composite fell (.2.3IX or 5.3IX or 6.37 points). 2.05% to 11,338.36.

The biggest drag on the S&P 500 came from the financials sector (.SPSY) followed by information technology (.SPLRCT).

The financial index ended the day down 4%, the deepest one-day percentage loss since June 2020. The S&P banking subsector (.SPXBK) turned negative year-to-date on Thursday, last down 4.7% so far for 2023. Thursday was the first full day of trading below the 200-day moving average since January 5.

All S&P’s 11 major industrial sectors ended the session lower. Utilities (.SPLRCU), down 0.8% was the smallest decliner. Consumer Staples (.SPLRCS) was the next smallest, down 0.95%, with Healthcare (.SPXHC) down 1%.

With investors already worried that the Fed could tighten too much and cause a recession and hurt demand for bank loans, “there is an element of ‘sell first ask questions later’ with regard to contagion risk,” said Luschini at SVB’s Janney Financial for banks. Montgomery Scott.

SVB closed down 60% at $106.04 after falling at one point by around 63% and hitting its lowest level since August 2016 after the lender cut its outlook for 2023 and launched a share sale to shore up its balance sheet.

Signature Bank ( SBNY.O ) also weighed on the sub-index, which fell 12% to $90.76 after its crypto-bank counterpart Silvergate Capital Corp ( SI.N ) disclosed plans for voluntary liquidation. Silvergate closed down 42% at $2.84.

On the bright side, General Electric Co ( GE.N ) closed up more than 5% after the industrial conglomerate reiterated its 2023 earnings forecast.

Declining issues outnumbered advancing ones on the NYSE by a ratio of 5.12 to 1; on the Nasdaq, a 3.83 to 1 ratio favored decliners.

S&P 500 posted 5 new 52-week highs and 22 new lows; The Nasdaq Composite registered 58 new highs and 289 new lows.

On US exchanges, 11.69 billion shares changed hands compared to the average of 10.95 billion for the last 20 sessions.

Sinéad Carew reports in New York, Amruta Khandekar, Shristi Achar A and Johann M Cherian in Bengaluru

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