Dow tumbles over 400 points in final hour of trade as investors await monthly employment report

U.S. stocks extended losses in the final hour of trade on Thursday, while awaiting Friday’s February employment data that could help decide how large an interest rate hike the Federal Reserve will impose at its next meeting in two weeks.

Financial sector stocks were particularly hard hit along with cryptocurrencies after Silvergate Capital Corp., collapsed overnight amid growing scrutiny in Washington. Other financial stocks fell, dragged down by SVB Financial Group, which fell by a record amount.

How are stocks trading
  • The S&P 500
    dropped 56 points, or 1.4%, to 3,936

  • Dow Jones Industrial Average
    was off 412 points, or 1.3%, to 32,387

  • Nasdaq Composite
    declined by 174 points, or 1.5%, to 11,399

Both the S&P 500 and Nasdaq finished higher on Wednesday, with only the Dow finishing in the red, while all three indexes remained on track for weekly losses. A weekly drop for the S&P 500 would mark its fourth such pullback in five weeks.

What’s driving markets

U.S. stocks trimmed earlier gains and extended losses on Thursday afternoon after trading modestly higher after the open when the latest weekly jobless claims data showed an unexpectedly large uptick in the number of Americans filing for unemployment benefits.

The number of Americans who applied for unemployment benefits in early March jumped to a 10-week high of 211,000, the highest level since Christmas. That’s higher than the 195,000 new applicants that economists polled by the Wall Street Journal had anticipated.

Economists said the data suggest that the labor market might be starting to slow, which is seen as a necessary prerequisite for driving inflation back to the Fed’s 2% target.

“The labor market might just be on the cusp of an inflection point,” said Peter Boockvar, chief investment officer of Bleakley Financial Group, in emailed commentary.

Investors are now looking ahead to Friday’s closely watched February jobs report from the Department of Labor. Economists polled by the Wall Street Journal expect 225,000 jobs were created last month after 517,000 new jobs were created in January, a number that was much higher than economists had anticipated.

“If we do get the expected 200,000, or really anything between say 180,000 and 240,000, this would be a return to the prior trend and would signal that last month was indeed a one-off,” said Brad McMillan, chief investment officer of Commonwealth Financial Network, in emailed comments.

“That would be perceived as a positive by the Fed and markets, suggesting that inflation may start moderating again but is still high enough to allow for continued economic growth.”

See: Wall Street sees smaller 225,000 increase in U.S. jobs in February. A much larger gain might spur stiffer Fed rate hike.

The Russell 2000
the small-cap index, is on pace to close below its 50-day moving average for the first time since January 9, 2023, according to Dow Jones Market Data.

Regional bank stocks underperformed on Thursday. Shares of Silicon Valley Bank parent company SVB Financial Group
plummeted more than 61% after the company disclosed large losses from securities sales and a stock offering meant to provide a boost to its balance sheet. SVB is on pace to book the biggest one-day selloff since the dotcom boom, while its trading was halted for volatility multiple times, according to Dow Jones Market Data.

Signature Bank 
 shares dropped 11.2%undefined

The KBW Bank Index
of 24 leading banks slumped 7.1%, on pace for its worst day since June 26, 2020, according to Dow Jones Market Data. SPDR S&P Bank ETF
was down 6.5%.

See: SVB Financial’s stock suffers biggest drop in 25 years after large losses on securities sales, equity offering

Treasury yields fell with the yield on the 2-year note BX:TMUBMUSD02Yslipped to 4.885% from 5.064% on Wednesday. 

Stocks suffered earlier in the week after Powell said during testimony on Capitol Hill that rates would likely need to rise even further than market participants had expected. However, the main indexes saw some relief after the Fed chief clarified that policymakers hadn’t yet decided on the size of the next rate hike.

Investors have already digested several reports on the labor market this week, including a report on the number of job openings, which showed that the number of Americans quitting their jobs had fallen below 4 million in January for the first time in 19 months.

“The big picture is that the labor market is easing, but it’s still tighter than it was before the pandemic,” said Sonu Varghese, a global macro strategist at Carson Group.

See: Bad economic data won’t be good for stocks, but good data will be even worse, this JPMorgan technical strategist says

Companies in focus
  • Uber Technologies Inc.
    shares dropped 4.4% on Thursday after Bloomberg reported on Wednesday that the ride-hailing food and package delivery company was considering a spinoff of its struggling Uber Freight business.

  • Silvergate Capital Corp.
    shares slumped 32.2% after the La Jolla. Calif-based lender said it would wind down operations and liquidate its crypto-friendly lender Silvergate Bank. Silvergate shares could hit a record low on Thursday if those losses hold through the regular trading session, according to Dow Jones Market Data.

  • Credit Suisse Group AG’s U.S-listed shares
    fell 4% after the Swiss bank said publication of its annual report for 2022 would be delayed due to a late call from the Securities and Exchange Commission, which questioned its 2019 and 2020 cash-flow statements.

  • General Motors Co.
    slipped 4.1% after the automaker announced a voluntary buyout program that’s expected to lead to an employee separation charge of $1.5 billion.

— Jamie Chisholm contributed to this article