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Wall St falls on jitters about banks after mixed jobs report

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., March 6, 2023. REUTERS/Brendan McDermid

Wall Street’s indexes fell on Friday as investors stressed out about the health of U.S. banks broadly after regulators had to close a high-profile lender to the technology sector, overshadowing the February jobs report.

California banking regulators said they closed SVB Financial Group (SIVB.O) 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 (SI.N) said it would have to wind down as it was hit by huge losses from the collapse of FTX cryptocurrency exchange.

“Whether there’s specific concerns about any other companies in the financial space outside of Silicon Valley Bank, when you combine the debacle of Silvergate with the collapse of Silicon Valley Bank … that’s creating a ripple effect of concern for the overall market stability,” said Michael James, managing director of equity trading at Wedbush Securities In Los Angeles.

The KBW regional banking index (.KRX) was down 3.6% while the S&P 500 financials index (.SPSY) was down 1.7%.

The Dow Jones Industrial Average (.DJI) fell 356 points, or 1.1%, to 31,898.86, the S&P 500 (.SPX) lost 59.09 points, or 1.51%, to 3,859.23 and the Nasdaq Composite (.IXIC) dropped 215.77 points, or 1.9%, to 11,122.58.

All 11 S&P 500 industry sectors were in the red with Real Estate (.SPLRCR), down 2.98% and leading declines while consumer staples (.SPLRCS) the top performer, down just 0.5%.

The Cboe Volatility Index (.VIX), an options-based indicator that reflects demand for protection against drops in the stock market, rose as much as 6.36 points to a five-month high of 28.97 and was last trading at 26.54.

Earlier, the non-farm payrolls report showed the U.S. economy added more jobs than expected in February while average hourly earnings rose 0.2% last month after gaining 0.3% in January and unemployment rose to 3.6%.

The softening in the labor market eased concerns driven by hawkish remarks from Fed Chair Powell this week that the Federal Reserve could raise rates by 50 basis points at its March meeting.

While increasing unemployment and labor market participation ease pressure on the Fed to hike rates, investors were more focused on uncertainties around the financial system, said John Praveen, managing director & Co-CIO at Paleo Leon in Princeton, New Jersey.

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

Among other stocks, Gap Inc (GPS.N) was down 4.9% after the apparel maker posted a bigger-than-expected fourth-quarter loss and forecast full-year sales below Wall Street estimates.

Oracle Corp (ORCL.N) slid 3.6% after the software firm missed third-quarter revenue estimates. Caterpillar Inc (CAT.N) slipped 5% after UBS downgraded the equipment maker to “sell” from “neutral”.

Declining issues outnumbered advancing ones on the NYSE by a 4.69-to-1 ratio; on Nasdaq, a 4.68-to-1 ratio favored decliners.

The S&P 500 posted no new 52-week highs and 39 new lows; the Nasdaq Composite recorded 20 new highs and 468 new lows.

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