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 Silicon Valley Bank.
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%.
This 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 this week include February retail sales on Wednesday, February housing starts and building permits on Thursday, and March consumer sentiment on Friday.
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