In This Article:
By Stephen Culp
NEW YORK (Reuters) - U.S. stocks closed sharply lower and Treasury yields extended their slide on Friday over fears of contagion in the financial sector and strong February employment data showing the economy added more jobs than expected.
All three major U.S. stock indexes ended the session down more than 1%, with the tech-laden Nasdaq suffering the largest percentage loss.
The indexes ended a tumultuous week significantly lower than last Friday's close. The S&P had its biggest weekly percentage loss since September, while the Nasdaq and the Dow notched their largest respective losses since November and June.
Shock waves continue to reverberate through global financial stocks after regulators closed SVB Financial Group following the bank's failed attempt to raise capital.
"Investors may be getting worried that the Fed is pushing things too far in one direction," said Sal Bruno, chief investment officer at IndexIQ in New York. "And with the yield curve as inverted as it is, that is generally not a good environment for banks."
The U.S. economy added a consensus-beating 311,000 jobs last month, while the unemployment rate unexpectedly ticked higher, along with the labor market participation rate.
Hourly wage growth cooled on a monthly basis, but gained some heat year-on-year, albeit not as much as economists predicted.
"There was something in (the jobs report) for everyone," Bruno added. "There's a case to be made for the Fed to be less aggressive if you look at the wage growth."
"But with payrolls coming in over 300,000, you could make the case that the Fed to needs to hike (interest rates) more because the economy is still running very hot," he said.
The data caps a week in which markets were preoccupied with Fed Chairman Jerome Powell's hawkish two-day testimony before Congress, which moved the needle toward the likelihood that the central bank will hike its key policy rate by 50 basis points this month.
Those expectations cooled following the jobs report.
At last glance, financial markets are pricing in a 42.5% chance of a 50 basis-point rate hike and a 57.5% chance of a smaller, 25 basis-point increase to the fed funds target rate at the conclusion of the March 21-22 monetary policy meeting.
Analysts now look to Tuesday's consumer prices data, which will flesh out the February inflationary picture.
(Graphic: Inflation - https://www.reuters.com/graphics/USA-STOCKS/jnvwyanmnvw/inflation.png)
The Dow Jones Industrial Average fell 345.22 points, or 1.07%, to 31,909.64, the S&P 500 lost 56.73 points, or 1.45%, to 3,861.59 and the Nasdaq Composite dropped 199.47 points, or 1.76%, to 11,138.89.