4:05pm: S&P financial sector has its worst day since June 2020
The Dow closed Thursday down 542 points, 1.7%, at 32,256, the Nasdaq Composite dropped 238 points, 2.1%, to 11,338 and the S&P 500 declined 74 points, 1.8%, to 3,918. The small-cap Russell 2000 index lost 51 points, 2.7%, to 1,828.
The S&P financial sector fell about 4%, its worst day since June 2020. Shares of SVB Financial swooned 61% after the firm announced a $1.75 billion stock sale, and Silvergate stock tumbled 30% on news that it’s shutting down operations. Two bigger bellwethers, Bank of America and Wells Fargo, saw shares drop more than 6% each.
Investors remain spooked about another big interest rate hike that could come from the Federal Reserve's next meeting.
“The Fed has changed the narrative that drove stocks higher for most of January and late December,” said Adam Sarhan, CEO of 50 Park Investments, as reported by CNBC. “The market rallied on the assumption that the Fed would stop raising rates, would pause in the summer — or sometime in the near future. Powell made it very clear that’s just not the case.”
12:05pm: Weekly jobless claims rise more than expected
US stocks were mixed in noon trading on weaker jobless data ahead of tomorrow’s key employment report for February.
At midday, the Dow lost 14 points to 32,785 while the S&P 500 eased 1 point at 3,992 and the tech-heavy Nasdaq rose 10 points to 11,586.
“The back-and-forth week continues, as signs of some weakness in US employment data prompted hopes that perhaps Powell’s hawkishness earlier in the week was misplaced,” IG chief market analyst Chris Beauchamp said.
“Most investors of course are now waiting to see how tomorrow’s jobs data plays out, which will set the stage for US inflation next week,” he added.
Notable movers included shares of Silvergate Capital Corp, which sank about 30% after the crypto-focused bank announced plans to shut down its operations.
9:40am: Jobless claims data supports stocks
US stocks edged into positive territory at the open as initial jobless claims for last week came in higher than expected ahead of Friday’s crucial non-farm payrolls report.
The Dow Jones Industrial Average was up 133 points or 0.4% at 32,931 points, the S&P 500 had added 8 points or 0.2% at 3,999 points, and the Nasdaq Composite was up 6 points or 0.1% at 11,585 points just after the opening bell.
Initial jobless claims for last week came in at 211,000, a 10-week high. This was an increase from 192,000 in the previous week, and ahead of the consensus expectation of 195,000.
FOREX.com market analyst Fiona Cincotta noted that stocks had eased from their earlier losses following the jobless claims data in a case of “bad news is good news for stocks.”
“Jobless claims rising to a 10-week high had helped to ease concerns and could suggest that the labour market is starting to show some early signs of slack appearing,” she said.
“All eyes are now on tomorrow’s NFP data to see whether it is another blowout report or whether it was a one-off.”
Pantheon Macroeconomics senior US economist Kieran Clancy added that jobless claims had been temporarily boosted by bad weather in the upper Midwest and California, but a sustained increase was in sight.
“The bigger picture here is that claims remain very low and range-bound,” Clancy said.
“That said, the latest data from Challenger, released earlier today, show that the number of layoffs announced in January and February was the highest since 2009, and nearly double the pre-Covid trend.
"This will take time to filter through to the claims data, but we expect to see a clear and sustained increase by the spring.”
6:30am: Waiting for the data
Wall Street is expected to open down as markets continue to digest two days of testimony to Congress by Federal Reserve chair Jerome Powell, with a monthly jobs report and next week’s consumer inflation data likely to determine the extent of the Fed’s next interest rate hike.
Futures for the Dow Jones Industrial Average (DJIA) fell less than 0.1% in Thursday pre-market trading, while those for the broader S&P 500 index shed 0.2%, and contracts for the Nasdaq-100 declined 0.5%.
US stocks ended mixed on Wednesday after Powell softened his tone on the second day of his semi-annual monetary policy report to lawmakers. The DJIA closed 0.2% lower at 32,799, while the Nasdaq Composite added 0.4% to 11,576, and the S&P 500 gained 0.1% to 3,992. The small-cap Russell 2000 index fell 1 point to 1,877.
“After the sizeable losses on Tuesday, markets showed signs of stabilising over the last 24 hours as Fed chair Powell put forward a slightly softer message on the pace of future rate hikes,” commented Deutsche Bank strategist Jim Reid.
“He was appearing before the House Financial Services Committee, where he delivered almost exactly the same testimony as he had to the Senate Banking Committee the previous day," he added. "However, there was one important caveat added, since when referring to his comments that ‘we would be prepared to increase the pace of rate hikes’, he said ‘I stress that no decision has been made on this’. So a clear message that faster rate hikes were not a done deal just yet."
“Whilst Powell was trying to steer us away from a specific outcome, ultimately the decision was always going to depend significantly on tomorrow’s jobs report, as well as the CPI release on Tuesday," Reid said.
The US jobs report, out on Friday, is expected to show non-farm payrolls increased by 205,000 in February after showing a massive gain of 517,000 jobs in January, according to economists polled by Reuters.