Wall St sinks on jitters about banks, mixed jobs report

Wall Street’s indexes have closed lower with investors running for the exits as they stressed out about the health of US banks after regulators closed a high-profile lender to the technology sector.

California banking regulators said they closed Silicon Valley Bank Financial Group to protect deposits in the largest bank failure since the financial crisis. A capital crisis at SVB had already put pressure on bank stocks globally.

SVB had tried but failed to shore up its balance sheet through a stock sale proposed late on Wednesday. The same day, crypto-lender Silvergate Capital said it would have to wind down after huge losses from the FTX cryptocurrency exchange collapse.

“There’s concern cracks may be appearing in the financial system as a result of the Federal Reserve’s aggressive rate hikes,” said Carol Schleif, chief investment officer, BMO family office in Minneapolis. “The fear is whether it’s broader than one industry’s bank and one segment of the economy.”

While many investors were looking through their bank holdings for signs of risk, Schleif said much of the weakness in regional bank stocks stemmed from a “proverbial shoot first ask questions later situation.”

The KBW regional banking index and the S&P 500 financials index were under pressure throughout the session.

According to preliminary data, the S&P 500 lost 56.64 points, or 1.45 per cent, to end at 3,861.78 points, while the Nasdaq Composite lost 199.20 points, or 1.76 per cent, to 11,139.16. The Dow Jones Industrial Average fell 342.20 points, or 1.06 per cent, to 31,912.66.

Investors had expected to be more focused on economic data than bank stocks. Before the market opened the non-farm payrolls report showed the US economy added more jobs than expected in February while average hourly earnings rose 0.2 per cent last month after gaining 0.3 per cent in January and unemployment rose to 3.6 per cent.

The data had eased concerns that the Fed could raise rates by 50 basis points at its March meeting after hawkish remarks from Fed Chair Powell this week.

But investors were more focused on uncertainties around the bank system, said John Praveen, managing director & Co-CIO at Paleo Leon in Princeton, New Jersey.

“Whatever positive vibes came out of the labour market report were upstaged by negative vibes from the SVB situation,” said Praveen.

In individual stocks, Gap Inc fell after the apparel retailer posted a bigger-than-expected fourth-quarter loss and forecast full-year sales below Wall Street estimates.

Oracle Corp slid after the software firm missed third-quarter revenue estimates.