US stocks were smoked on Friday after the crucial jobs report came out warmer than expected and concerns about the spectacular failure of Silicon Valley Bank (SIVB) continued to weigh on the markets.
Checking back on the S&P 500 (^GSPC) around 1 p.m. ET, the index turned red 1.5%, while the Dow Jones Industrial Average (^DJI) fell 1.2%. Contracts with the Nasdaq Heavy Composite (^IXIC) fell 1.8%.
Bond yields fell. The yield on the 10-year US Treasury fell to 3.71% on Friday.
Wall Street digested two major events in the financial world on Friday: the jobs report and the evolving saga of a Silicon Valley bank, which became the biggest financial institution to fail since the 2008 financial crisis.
The February jobs reading blew up previous expectations again, as the US economy added 311,000 jobs, a slower pace than the explosive number for January, and compared to economists’ estimates of job gains at 225,000 jobs. The unemployment rate rose to 3.6%, and wage growth rose 4.6% year-over-year, slower than expected.
“Just go to first principles. Labor markets are undeniably strong. Over the past three months, non-farm payrolls averaged 351,000,” Neil Dutta, head of economics at Renaissance Macro Research, wrote in a statement.
“Full-time employment has risen by an average of 442,000 per month this year. Given the increased participation rate and slowing wage growth (often a make-up story), I can see why the bears flocked to today’s report, especially given the start of preparation, But let’s say the obvious, “The Fed’s job isn’t done. Final interest rates are still going up. Oh, it’s time to hit the mute button on people talking about the weather, the impending recession, the no-call—the spelling of the story is a lie.” .
Notable job gains were in leisure, hospitality, retail, government, and healthcare, while employment lagged in information, transportation, and warehousing. The Bureau of Labor Statistics reported.
The Federal Reserve is keeping a close eye on all fronts of the labor market as the central bank tries to calm inflation. February’s jobs print continued to reveal a hot streak in hiring, even as other government data indicated a strengthening economy. The payroll release was seen by economists as a report showing whether employment gains were an anomaly or the start of an economic acceleration.
The backlog of economic data, along with comments this week from Chairman Jerome Powell, has fueled the debate over whether a 0.25% or 0.50% rate hike from the Fed is likely at its March meeting.
According to the CME FedWatch Tool, Market participants are betting that the Fed will raise interest rates by a quarter point at its next meeting.
However, recent events in the banking world have raised other concerns for Fed officials as their monetary tightening policy is putting pressure on the banking system.
On Friday, US bank regulators took control of a Silicon Valley bank, as the lender failed in its attempts to raise fresh capital. Treasury Secretary Janet Yellen said Friday that she is keeping an eye on “a few banks” amid a Silicon Valley bank crisis.
The bank’s share price fell 68% during the pre-market trading session on Friday before it stalled out.
Bad sentiment spread across the markets as the KBW Bank Index (^BKX) fell more than 2%, while index members including Bank of America (BAC) and JPMorgan Chase (JPM) rebounded on Friday during midday. First Republic Bank (FRC) shares fell 51% and the stock stalled due to the volatility. Other regional bank stocks including PacWest Bancorp (PACW), Western Alliance Bancorp (WAL) and Signature Bank (SBNY) have also been halted.
In other single stock moves, shares of Allbirds (BIRD) fell 46% after the shoe retailer published a disappointing quarterly earnings report that included a double-double in sales, revealing an annual loss of $101 million. There is also a change in leadership as Chief Financial Officer Mike Bufano is leaving the company.
Shares of DocuSign (DOCU) fell 19% after analysts by JPMorgan downgraded the stock, citing a disappointing demand outlook. Despite the earnings and revenue, Chief Financial Officer Cynthia Gaylor announced that she will be stepping down this year.
Elsewhere, in the cryptocurrency market, bitcoin (BTC-USD) fell below $20,000 on Friday amid the Silvergate Capital (SI) divestiture and regulatory pressure on the industry.
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Danny Romero is a reporter at Yahoo Finance. Follow her on Twitter @tweet
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