STORY: Wall Street’s three major stock indexes closed lower Thursday with bank stocks creating the biggest drag as investors worried that Friday’s jobs report could spur aggressive interest rate hikes by the Federal Reserve.
Fed Chair Jerome Powell this week exacerbated those concerns as he highlighted the battle with high inflation during his Congressional testimony.
The Dow dropped 1-and-2/3rds percent, the Nasdaq fell more than 2-percent, and the S&P 500 slid nearly 1-point-9 percent. All the S&P’s 11 major industry sectors ended the session lower
The February non-farm payrolls report is expected to show job gains that are less than half of the surprisingly strong numbers from January. However, Kevin Mahn, president and chief investment officer with Hennion & Walsh Asset Management says a better than expected result could lead the central bank to hike rates more frequently this year.
“We saw a dramatic jump in January above 500,000. Now estimates are looking for a a gain of around 225,000 in February. If it’s anything north of that number, once again, that will lead investors to believe that the Fed may need to turn up the pace of their interest rate hikes and maybe even raise three additional times in 2023 as opposed to just two times as many investors, including myself, believed prior to this week.”
Traders are also looking for the size of interest rate increases to rise. They put the chances of a half-point move at the March meeting at 60-percent — up from half that before Powell’s testimony.
Stocks making big moves Thursday included SVB Financial Group which plunged 60-percent after the lender slashed its 2023 outlook and launched a share sale to shore up its balance sheet.
Also General Electric which climbed 5-percent as the industrial conglomerate reiterated its 2023 earnings forecast.