WEEK OF MAR. 6 THROUGH MAR. 10, 2023
The S&P 500 index fell 4.5% last week as a larger-than-expected rise in February jobs added to rate worries while investors also were spooked by the collapse of SVB Financial Group's (SIVB) Silicon Valley Bank.
The market benchmark ended Friday's session at 3,861.59, down from last week's closing level of 4,045.64. The index is still in positive territory for 2023, but barely -- its year-to-date gain has slimmed to just 0.6%.
The index began the week's slide on Tuesday after Federal Reserve Chair Jerome Powell said most-recent economic data are stronger than originally forecast, suggesting interest rates will rise beyond what was anticipated.
"If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes," he said.
The comments added to the market's nerves ahead of Friday's release of February jobs data. Investors have been worried that a stronger-than-expected labor market could prompt the Federal Open Market Committee to raise interest rates more aggressively to tamp down inflation.
The February jobs numbers indeed came in stronger than expected.
Nonfarm payrolls rose by 311,000 last month, the US Labor Department said, well above the 225,000 jobs increase expected in a survey compiled by Bloomberg. Private payrolls rose by 265,000 in February, surpassing the increase of 215,000 private jobs expected. The unemployment rate ticked up to 3.6% in February from 3.4% in January, but that came as the participation rate rose and the size of the labor force expanded.
The market also was rattled on Friday by the collapse of Silicon Valley Bank, which represents the second-largest bank failure in US history. The California Department of Financial Protection & Innovation said it closed the SVB unit and appointed the Federal Deposit Insurance Corp. as receiver.
All of the S&P 500's sectors fell last week, led by the financial sector that slid 8.5% amid the collapse of Silicon Valley Bank.
Materials dropped 7.6%, real estate was down 7%, consumer discretionary lost 5.6% and energy lost 5.3%.
Shares of SVB Financial Group plunged 63% last week. The company's Silicon Valley Bank unit was closed Friday by the Calitornia Department of Financial Protection and Innovation and the US Federal Deposit Insurance Corp. was named receiver. All insured deposits were transferred to a new entity created by the FDIC called the Deposit Insurance National Bank of Santa Clara. Insured depositors will have access to their insured funds no later that Monday, the FDIC said.
Also in the financial sector, shares of First Republic Bank (FRC) fell 34% as the company said its underwritten public offering of 2.5 million common shares priced for expected gross proceeds of about $350 million. This implies a per-share price of $140, which represents a discount to the stock's last reported closing price prior to the pricing. The number of shares also marked an increase from 2 million shares the bank previously said it planned to sell.
Among the decliners in the materials sector, shares of International Flavors & Fragrances (IFF) shed 9.7%. Berenberg Bank lowered its price target on the company's stock to $103 each from $127 while keeping its investment rating on the shares at hold.
Next week's economic data will feature key inflation readings, with the February consumer price index set to be released on Tuesday and the February producer price index expected on Wednesday. Other data anticipated next week include February retail sales on Wednesday, February housing starts and building permits on Thursday, and March consumer sentiment on Friday.