Dow Jones, S&P 500, Nasdaq set for volatile open as hot jobs report, SVB turmoil mark disorderly end to the week

8.35am: Jobs report beats expectations

The US economy added 311,000 jobs in February and the unemployment rate edged up to 3.6%, the US Bureau of Labor Statistics reported today.

February’s non-farm payrolls figure far exceeded the expected 205,000 but came in lower than January’s blowout 517,000 reading. Analysts had been expecting the unemployment rate to remain steady at 3.4%.

Notable job gains occurred in leisure and hospitality, retail trade, government, and health care. Employment declined in information and in transportation and warehousing, the Bureau said.

Stocks were already headed for a volatile day after an emergency capital raise by Silicon Valley Bank triggered a sell-off in financial stocks, with the hotter-than-expected jobs report also likely to knock investor confidence. 

Shortly after the release of the jobs report, futures for the Dow Jones Industrial Average had fallen 0.3%, the S&P 500 was down 0.2%, and the Nasdaq Composite was flat in pre-market trading.

6:30am: Turmoil in the banking sector 

Wall Street is expected to open lower as investors eye the release of February’s jobs report amid turmoil in the market after an emergency capital raise by Silicon Valley Bank triggered a sell-off in financial stocks. 

Futures for the Dow Jones Industrial Average fell 1.7% in Friday pre-market trading, while those for the broader S&P 500 index shed 0.4% and contracts for the Nasdaq-100 declined 0.1%.

The S&P financial sector fell about 4% on Thursday, its worst day since June 2020. Shares of Silicon Valley Bank parent SVB Financial Group sank 61% after the firm announced a $1.75 billion stock sale after revealing a day earlier it had lost roughly $1.8 billion following the sale of a portfolio of securities valued at $21 billion, which it offloaded in response to a decline in customer deposits. Two bigger bellwethers, Bank of America and Wells Fargo, saw shares drop more than 6% each. SVB’s shares declined a further 42% in pre-market trading Friday.

The DJIA closed 1.7% lower at 32,256, the Nasdaq Composite dropped 2.1% to 11,338 and the S&P 500 fell 1.8% to 3,918. The small-cap Russell 2000 index lost 2.7% to 1,828.

“Wall Street is reeling amidst heavy selling across US banking stocks, with fears over how robust the sector is in light of rising rates and squeezed consumer confidence taking a toll,” commented James Hughes, chief market analyst at Scope Markets. “The four biggest US-listed banks lost in excess of $50 billion on Thursday and the downside pressures look set to continue building ahead of the open.”

Hughes noted that today’s non-farm payrolls (NFPs) are set to offer little respite for the markets.

The NFPs, due for release by the Labor Department at 8:30am Eastern Time, are expected to show an increase of 205,000 jobs for February after January’s larger-than-expected gain of 517,000.

“If they come in too hot then the Fed will see this as validation of its policy tightening agenda, too low and the damage has already been done – it could yet be a rather disorderly end to the week,” he added. “After yesterday’s jump in unemployment claims, the participation rate will be closely followed in today’s data, as whilst trending upward it remains below pre-pandemic levels and a sluggish print here will do nothing to help bring down that high number of job vacancies, either. Spring may be emerging, but it seems markets may have some storms to navigate yet.”

Initial jobless claims for last week came in at 211,000, a 10-week high. This was an increase from 192,000 in the previous week, and ahead of the consensus expectation of 195,000.