Closing Stock Market SummaryThe stock market suffered sizable losses today. The employment report brought relatively good news with nonfarm payrolls being stronger than expected and average hourly earnings growth being weaker than expected, but the dealings involving SVB Financial (SIVB halted) were the biggest driver of today's price action. A broad retreat saw the S&P 500 fall below 3,900 on above average volume.
SVB Financial Group's Silicon Valley Bank has been shut down as the FDIC created a Deposit Insurance National Bank of Santa Clara to protect insured depositors of Silicon Valley Bank, Santa Clara, California. This news followed earlier reports that the Founders Fund had advised companies to pull their money from Silicon Valley Bank, according to Bloomberg, and that deposit outflows at SVB Financial were outpacing the sales process (i.e., there were reports that larger banks had reportedly been looking at buying SVB, but their willingness to do so diminished as the bank's deposits went away), according to CNBC.
SVB Financial's troubles created uncertainty about a potential contagion effect in the banking industry that fostered a strong flight to safety bid in the Treasury market. The 2-yr note yield fell 29 basis points to 4.59% and the 10-yr note yield is down 23 basis points to 3.70%.
The SPDR S&P Banking ETF (KBE) declined 4.2% and the SPDR S&P Regional Banking ETF (KRE) fell 4.4%.
Most reporting thus far has highlighted views by analysts/pundits that SVB's situation won't prove to be a systemic banking problem, though, given how well capitalized the banking system is. That said, the market saw a rebound effort interrupted after it was reported around 12:30 p.m. ET that Silicon Valley Bank would be shut down. The market lost its footing from there as broad based selling efforts picked up sending the S&P 500 to 3,846 at its lows for the session.
The S&P 500 financial sector (-1.8%) was among the worst performers for the 11 sectors, but its losses were limited somewhat by gains in Dow component JPMorgan Chase (JPM 133.65, +3.31, +2.5%), which is viewed as a financial fortress that stands to benefit from the fallout at SVB Financial.
Meanwhile, the defensive-oriented consumer staples (-0.5%) and health care (-0.7%) sectors closed with the slimmest losses. The CBOE Volatility Index flirted with 29.00 today before settling up 9.7% at 24.80. For the week, the CBOE Volatility Index increased 34.1%.
Declining stocks outpaced advancing stocks by a 6-to-1 margin at the NYSE and a better than 4-to-1 margin at the Nasdaq.
- Nasdaq Composite: +6.4% YTD
- S&P Midcap 400: +0.9% YTD
- Russell 2000: +0.7% YTD
- S&P 500: +0.6% YTD
- Dow Jones Industrial Average: -3.7% YTD
Reviewing today's economic data:
- February Nonfarm Payrolls 311K (consensus 205K); Prior was revised to 504K from 517K; February Nonfarm Private Payrolls 265K (consensus 203K); Prior was revised to 486K from 443K;
- February Unemployment Rate 3.6% (consensus 3.4%); Prior 3.4%; February Avg. Hourly Earnings 0.2% (consensus 0.3%); Prior 0.3%; February Average Workweek 34.5 (consensus 34.6); Prior was revised to 34.6 from 34.7
- The key takeaway from the report is that it was still a strong report for this point in the Fed's tightening cycle, and while the SIVB issue is causing a notable distraction, the strength of the report in our estimation is still enough to keep a 50 basis points rate hike on the table for the March FOMC meeting.
There is no U.S. data of note on Monday.
