U.S. stocks edged lower and Treasury yields slid on Friday in the wake of the anxiously anticipated February employment report, and as lingering worries over contagion in the financial sector prompted a flight to safety.
All three major U.S. stock indexes were lower, with the S&P and the Nasdaq on course to post their largest weekly losses since September.
The trading echoed Thursday’s session, when SVB Financial Group’s attempt to raise capital failed, spreading uncertainty through global financial stocks.
“There’s a building crisis of confidence in the financial community, the worry being that SVB is just the tip of the iceberg and more regional banks could admit to unanticipated financial challenges,” said Sam Stovall, chief investment strategist of CFRA Research in New York.
The U.S. economy added a more-than-expected 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.
“Even though the payrolls came in higher than expected, the underlying inflation indicators were more muted,” Stovall added. “This likely reduced the anxiety heading into next week’s inflation reports.”
The data caps a week in which markets were preoccupied with Fed Chairman Jerome Powell’s hawkish two-day testimony before Congress
Those expectations cooled following the jobs report.
Financial markets are now pricing in a 41% chance of a 50 basis point rate hike and a 59% 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.
The Dow Jones Industrial Average fell 42.57 points, or 0.13%, to 32,212.29, the S&P 500 lost 16.16 points, or 0.41%, to 3,902.16 and the Nasdaq Composite dropped 65.33 points, or 0.58%, to 11,273.02.
European stocks slid over uncertainty regarding tightening central bank policy, and looming worries over the health of the U.S. banking sector.
The pan-European STOXX 600 index lost 1.67% and MSCI’s gauge of stocks across the globe shed 0.61%.
Emerging market stocks lost 1.03%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.46% lower, while Japan’s Nikkei lost 1.67%.
U.S. Treasury yields dropped, with the two-year yield setting a course for its biggest two-day drop since September 2008.
“(There is) a growing crisis of confidence that has triggered a flight to safety,” Stovall said. “Investors are fearful of a bank contagion and have flocked to the safety of Treasuries, elevating the price but reducing the yields.”
Benchmark 10-year notes last rose 56/32 in price to yield 3.7064%, from 3.923% late on Thursday.
The 30-year bond last rose 91/32 in price to yield 3.7074%, from 3.87% late on Thursday.
The greenback weakened against a basket of world currencies after the payrolls report hinted at cooling inflation.
The dollar index fell 1.06%, with the euro up 1.02% to $1.0688.
The Japanese yen strengthened 1.27% versus the greenback at 134.46 per dollar, while sterling was last trading at $1.2089, up 1.38% on the day.
Oil prices stabilized after the jobs data, but remained on track to notch a 4% drop on the week over rate hike jitters.
U.S. crude rose 0.13% to $75.82 per barrel and Brent was last at $81.66, up 0.09% on the day.
Gold prices surged following the employment report as odds grew for a smaller increase to the Fed funds target rate.
Spot gold added 1.8% to $1,864.29 an ounce.