U.S. stock markets closed sharply lower on Friday following the collapse of the biggest regional bank since the days of the great recession. The news had a contagion effect on the entire equity markets as investors remained extremely concerned that rigorous rate hike by the Fed in order to combat a record high inflation may result in a near term recession. Moreover, the job data for February were mixed. All three major stock indexes ended in negative territory. These indexes have also finished a tough last week.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 1.1% or 345.22 points to close at 31,909.64, marking the fourth consecutive close in loss, its longest streak since December. Notably, 19 components of the 30-stock index ended in negative territory and 11 in positive zone.
The tech-heavy Nasdaq Composite finished at 11,138.89 sliding 1.8% or 199.47 points due to weak performance of large-cap technology stocks. The S&P 500 plummeted 1.5% to end at 3,861.59. All 11 broad sectors of the benchmark index closed in negative territory.
The Real Estate Select Sector SPDR (XLRE), the Materials Select Sector SPDR (XLB), the Financials Select Sector SPDR (XLF), the Industrials select Sector SPDR (XLI) and the Technology Select Sector SPDR (XLK) tanked 3.2%, 2.1%, 1.8%, 1.9% and 1.8%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 9.7% to 24.80, marking its highest closing in three months. At its intraday high, the index reached at a five month high of 28.97. A total of 15.17 billion shares were traded on Friday, higher than the last 20-session average of 11.13 billion. Decliners outnumbered advancers on the NYSE by a 4.75-to-1 ratio. On Nasdaq, a 4.31-to-1 ratio favored declining issues.
Second Biggest Bank Collapse in U.S. History
On Mar 10, the Federal Deposit Insurance Corp. (FDIC) announced that regulators have closed Silicon Valley Bank (SVB) and taken control of its deposits. This was the biggest bank failure in the United States since the collapse of Washington Mutual in 2008 and the second-biggest bank failure in the nation’s history.
The privately controlled Silicon Valley Bank is a subsidiary of the SVB Financial Group . The 40-year-old highly respected regional bank, which lends primarily to technology and biotechnology startups, was the second victim of the aggressive interest rate hike policies adopted by the Fed in order to combat a record-high inflation.
On Mar 9, Silvergate Capital Corp. , a major lender to the crypto industry, announced that it will be shutting down operations and liquidating its bank. Silvergate Capital currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Department of Labor reported that nonfarm payrolls came in at 311,000 in February, beating the consensus estimate of 227,000. However, the number declined significantly from the previous month. January’s data was revised downward to 504,000 from 517,000 reported earlier. December’s data was also revised downward by 21,000 to 239,000.
The unemployment rate increased to 3.6% February from 3.4% in January. The consensus estimate was also 3.4%. This was primarily due to a small increase in labor force participation rate to 62.5%, marking its highest level since March 2020. The real unemployment rate (including discouraged workers and those holding part-time jobs for economic reasons) rose 0.2% month-over-month to 6.8% in February.
Average hourly earnings increased 0.2% in February compared with 0.3% in January. The consensus estimate was 0.3% too. Year over year, hourly wage rate rose 4.6% in February, below the consensus estimate of 4.8%. Average workweek was 34.5 in February. January’s data was revised downward to 34.6 from 34.7 reported earlier.
Weekly Roundup
Last week was highly disappointing for Wall Street. The Dow slid 4.4%, marking its biggest weekly decline since June 2022. The S&P 500 shed 4.6%, reflecting its largest weekly drop since September 2022. The Nasdaq Composite nosedived 4.7%, posting the single-largest weekly fall since November 2022.
Fed Chairman Jerome Powell’s indication of pursuing rigorous rate hike policies for longer time period, strong economic data suggesting a resilient U.S. economy and the collapse of two large regional banks significantly dented market participants’ confidence in risky assets like equities.
Image: Bigstock
Stock Market News for Mar 13, 2023
U.S. stock markets closed sharply lower on Friday following the collapse of the biggest regional bank since the days of the great recession. The news had a contagion effect on the entire equity markets as investors remained extremely concerned that rigorous rate hike by the Fed in order to combat a record high inflation may result in a near term recession. Moreover, the job data for February were mixed. All three major stock indexes ended in negative territory. These indexes have also finished a tough last week.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 1.1% or 345.22 points to close at 31,909.64, marking the fourth consecutive close in loss, its longest streak since December. Notably, 19 components of the 30-stock index ended in negative territory and 11 in positive zone.
The tech-heavy Nasdaq Composite finished at 11,138.89 sliding 1.8% or 199.47 points due to weak performance of large-cap technology stocks. The S&P 500 plummeted 1.5% to end at 3,861.59. All 11 broad sectors of the benchmark index closed in negative territory.
The Real Estate Select Sector SPDR (XLRE), the Materials Select Sector SPDR (XLB), the Financials Select Sector SPDR (XLF), the Industrials select Sector SPDR (XLI) and the Technology Select Sector SPDR (XLK) tanked 3.2%, 2.1%, 1.8%, 1.9% and 1.8%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was up 9.7% to 24.80, marking its highest closing in three months. At its intraday high, the index reached at a five month high of 28.97. A total of 15.17 billion shares were traded on Friday, higher than the last 20-session average of 11.13 billion. Decliners outnumbered advancers on the NYSE by a 4.75-to-1 ratio. On Nasdaq, a 4.31-to-1 ratio favored declining issues.
Second Biggest Bank Collapse in U.S. History
On Mar 10, the Federal Deposit Insurance Corp. (FDIC) announced that regulators have closed Silicon Valley Bank (SVB) and taken control of its deposits. This was the biggest bank failure in the United States since the collapse of Washington Mutual in 2008 and the second-biggest bank failure in the nation’s history.
The privately controlled Silicon Valley Bank is a subsidiary of the SVB Financial Group . The 40-year-old highly respected regional bank, which lends primarily to technology and biotechnology startups, was the second victim of the aggressive interest rate hike policies adopted by the Fed in order to combat a record-high inflation.
On Mar 9, Silvergate Capital Corp. , a major lender to the crypto industry, announced that it will be shutting down operations and liquidating its bank. Silvergate Capital currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Economic Data
The Department of Labor reported that nonfarm payrolls came in at 311,000 in February, beating the consensus estimate of 227,000. However, the number declined significantly from the previous month. January’s data was revised downward to 504,000 from 517,000 reported earlier. December’s data was also revised downward by 21,000 to 239,000.
The unemployment rate increased to 3.6% February from 3.4% in January. The consensus estimate was also 3.4%. This was primarily due to a small increase in labor force participation rate to 62.5%, marking its highest level since March 2020. The real unemployment rate (including discouraged workers and those holding part-time jobs for economic reasons) rose 0.2% month-over-month to 6.8% in February.
Average hourly earnings increased 0.2% in February compared with 0.3% in January. The consensus estimate was 0.3% too. Year over year, hourly wage rate rose 4.6% in February, below the consensus estimate of 4.8%. Average workweek was 34.5 in February. January’s data was revised downward to 34.6 from 34.7 reported earlier.
Weekly Roundup
Last week was highly disappointing for Wall Street. The Dow slid 4.4%, marking its biggest weekly decline since June 2022. The S&P 500 shed 4.6%, reflecting its largest weekly drop since September 2022. The Nasdaq Composite nosedived 4.7%, posting the single-largest weekly fall since November 2022.
Fed Chairman Jerome Powell’s indication of pursuing rigorous rate hike policies for longer time period, strong economic data suggesting a resilient U.S. economy and the collapse of two large regional banks significantly dented market participants’ confidence in risky assets like equities.