Wall Street falls on bank stocks tumble, jobs report jitters

Traders were betting that chances of a 50-basis-point rate hike at the Fed's March meeting were around 60 percent, according to CME Group's FedWatch tool, up sharply from a probability of 31 percent before Powell's Tuesday and Wednesday appearances in Congress.

"There's a lot of anticipation around tomorrow's jobs report. We're going to get a slew of data in the next week and a half," said Mona Mahajan, Senior Investment Strategist, Edward Jones, New York, also citing inflation and retail sales reports all due out before the next Fed meeting which ends March 22.

Earlier on Thursday, Labor Department data showed initial claims for state unemployment benefits rose 21,000 to a seasonally adjusted 211,000 for the week ended March 4, compared with economist forecasts for 195,000 claims.

While last week's increased jobless claims may be "the first sign the labor market may be showing signs of loosening," Mahajan wants to see "more data points to establish a trend."

The February non-farm payrolls report is expected to show a payrolls increase of 205,000 after January's blowout 517,000 figure, which had already led markets to brace for a bigger US rate hike.

Any proof last month's "gigantic payrolls number wasn't an anomaly" would serve to "reinforce the market's anxieties around the Fed's response to it," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

And with February wage increases expected to rise 4.7 percent compared with January's 4.4 percent, "it feels like its ticking in the wrong direction even if we just meet expectations," said Mahajan who will be closely watching the wage data.

The Dow Jones Industrial Average fell 543.54 points, or 1.66 percent, to 32,254.86, the S&P 500 lost 73.69 points, or 1.85 percent, to 3,918.32 and the Nasdaq Composite dropped 237.65 points, or 2.05 percent, to 11,338.36.

The biggest drag on the S&P 500 came from the financial sector followed by information technology.

The financials index ended the day down 4 percent, its deepest one-day percentage loss since June 2020. The S&P bank sub-sector turned negative for the year-to-date on Thursday, last down 4.7 percent so far for 2023. Thursday was its first full day trading below its 200-day moving average since January 5.

All the S&P's 11 major industry sectors ended the session lower. Utilities, down 0.8 percent was the smallest decliner. Consumer staples was the next smallest, down 0.95 percent, with healthcare down 1 percent.

With investors already concerned that the Fed could over-tighten and cause a recession and hurt bank lending demand, "there's an element of 'sell-first ask questions later' with regard to contagion risk," from SVB Financial for banks said Luschini at Janney Montgomery Scott.

SVB closed down 60 percent at $106.04 after falling at one point by around 63 percent and hitting its lowest level since August 2016 after the lender slashed its 2023 outlook and launched a share sale to shore up its balance sheet.

Also weighing on the sub-index was Signature Bank, which tumbled 12 percent to $90.76 after its crypto-bank peer Silvergate Capital Corp disclosed plans to voluntarily liquidate. Silvergate closed down 42 percent to $2.84.

On the bright side, General Electric Co closed up more than 5 percent after the industrial conglomerate reiterated its 2023 earnings forecast.

Declining issues outnumbered advancing ones on the NYSE by a 5.12-to-1 ratio; on Nasdaq, a 3.83-to-1 ratio favored decliners.

The S&P 500 posted 5 new 52-week highs and 22 new lows; the Nasdaq Composite recorded 58 new highs and 289 new lows.

On US exchanges 11.69 billion shares changed hands compared with the 10.95 billion average for the last 20 sessions.