Friday, March 10, 2023 7:27 a.m.
Stocks stumbled on Wall Street on Thursday and added to the week’s losses as markets remain nervous about the prospect of more aggressive action by the Federal Reserve to fight inflation.
The main indices started the day higher and gradually lost ground until they fell sharply at the end of the session.
The S&P 500 fell 73.69 points, or 1.8% to 3,918.32. It was the second worst loss of the year for the benchmark and further eroded the gains made throughout January to start the year.
The sharp decline, which sank 95% of S&P 500 stocks, was particularly difficult for banks. The S&P 500 financials sector fell 4.1%.
SVB Financial Group lost 60% of its value after announcing plans to raise up to $1.75 billion to strengthen its position amid concerns about rising interest rates and the economy. Bank of America, Citigroup and other major banks fell sharply.
The Dow Jones Industrial Average fell 543.54 points, or 1.7%, to 32,254.86 and the Nasdaq fell 237.65 points, or 2.1%, to 11,338.35.
The crisis follows two days of testimony before Fed Chairman Jerome Powell’s Congress, who said the central bank was ready to continue raising interest rates significantly if needed.
Fears of a persistent and aggressive Fed are weighing on major indices, which are all on track for weekly losses.
The Fed’s inflation-fighting policies risk slowing the economy too much and tipping it recessionwhile going too far in easing a buoyant labor market and causing many people to be unemployed.
A government report on Thursday showed the number of Americans applying for unemployment benefits last week rose the most in five months, but layoffs remain historic lows.
Two-year Treasury yields, which tends to track expectations about future Fed action, fell to 4.87% from around 5.05% just before the release of the unemployment report. He was hovering at his highest level since 2007.
Unemployment and inflation
The unemployment data follows a report on Wednesday showing the number of job vacancies advertised across the country last month was higher than economists expected. The US government’s fuller report on hiring is due Friday.
A big concern in the Fed and Wall Street labor market reports is the pace of wage growth. Strong wage increases are good for workers struggling to cope with high inflation, but it could also continue to push up inflation, making it harder for the central bank to fight high prices.
Wall Street reviewed a series of data that highlighted both a resilient economy and stubborn inflation. Further updates are coming next week when the government releases inflation reports at the consumer and wholesale level, as well as retail sales data.
Traders are leaning towards the Fed raising its benchmark interest rate by 0.50 percentage points on March 22. They had expected the central bank to hold to a lower increase of 0.25 points ahead of Mr Powell’s testimony this week, according to data from the CME Group.
In anticipation of the rest of 2023
The Fed’s objective is to bring inflation down to 2%.
This figure was 5.4% in January. The central bank has already raised its overnight rate to a range of 4.50% to 4.75% from virtually zero at the start of last year, its fastest series of hikes in decades.
Companies, meanwhile, have been cautious about their outlook through 2023 amid uncertainty about the direction of the economy and inflation.
General Motors fell 4.9% after joining a long list of companies planning to cut staff amid worries about a recession. Many companies are emerging from a weak fourth quarter, with earnings across the S&P 500 falling about 4.6%. Economists expect lower profits in the first half of 2023.
Investors were also focused on a mix of corporate news that sent several stocks soaring up and down. Toymaker Build-A-Bear Workshop jumped 21% after reporting strong fourth-quarter financial results.
JPMorgan Chase fell 5.4% after the bank sued its former executive Jes Staley, alleging he helped hide the sexual abuse and trafficking of Jeffrey Epstein for years in order to keep the financier as a client.
Associated Press – Press Association