Stocks extend weekly losses after jobs data and bank meltdown

Meanwhile, regulators shuttered Silicon Valley Bank after a run on deposits doomed the tech-focused lender’s plans to raise new capital. The bank’s parent company, SVB Financial Group,

is the largest US financial institution to collapse since 2008.

The S&P 500 fell 0.7%, while the blue-chip Dow Jones Industrial Average fell about 130 points, or 0.4%. The Nasdaq Composite lost 0.9%. Investor sentiment has deteriorated overall in recent days, with the S&P 500 losing nearly 4% over the week.

Stocks initially faltered after Friday’s jobs report offered mixed signals to the Federal Reserve’s efforts to tame inflation, then sold off heavily after news of the bank’s collapse . All sectors of the S&P 500 were in the red in afternoon trading, as the broad index headed for its worst week since September.

Analysts have warned of a bumpy ride ahead of Tuesday’s closely watched consumer inflation data.

“With the (headline) figure stronger than expected, investors can expect equity markets to react negatively…as it increases the likelihood of a more hawkish Fed,” said Venu Krishna, head of the US equity strategy at Barclays. “With continued strong readings, equity markets will brace for the ‘higher for longer’ rate scenario.”

Still, wage growth has lagged expectations and the unemployment rate has risen. Since wage growth is a major contributor to inflation, investors expected a slowdown in the labor market that would allow the Fed to slow its pace of rate hikes.

Art Hogan, chief market strategist at B Riley Wealth Management, said shortly after the release that Friday’s report “could impact how much the Fed needs to raise at its next meeting.”

Treasury yields fell after the report, indicating that investors are adjusting their rate hike expectations lower. The yield on the 2-year note fell 0.28 percentage points to 4.616%, heading for its biggest 2-day decline since 2008.

Lower yields may also mean investors are rushing to hedge towards safer assets. Bond yields fall as prices rise.

Big U.S. banks had already lost billions in market value on Thursday after SVB’s troubles first sparked broader concerns about the health of the financial sector.

Trading in SVB shares was halted on Friday morning after a 68% pre-market selloff that occurred as the bank rushed to raise new capital. SVB said it lost nearly $2 billion after being forced to sell assets to cover deposit withdrawals. The capital increase attempt failed and, at noon, the Federal Deposit Insurance Corp. said she had taken control.

Markets sold off around the world on Friday as investors rattled on bank concerns. Several banks were among the worst performers in the stock market, including PacWest Bancorp,

Western Alliance Bancorp and First Republic Bank, all of which plunged more than 20%.

SVB’s setbacks have highlighted a consequence of rising interest rates for some lenders. Rising rates have caused bond prices to fall, meaning many banks that hold large amounts of bonds are sitting on large unrealized losses.

The question highlights the broader impact of Fed interest rate increases on the economy and banks in particular, said Altaf Kassam, head of investment strategy and research for Europe. , Middle East and Africa at State Street Global Advisors.

“The broader concern is that not just Silicon Valley Bank, but across the economy, banks lent a lot in the good times when rates were so low, which, as rates have now increased so dramatically, will come back to haunt them,” he said.

Those concerns were showing signs of spreading overseas on Friday. German Bank,

Societe Generale and Credit Suisse all fell at least 4%.

“The market’s knee-jerk reaction to this risk event seems overdone, in our view,” Mark Haefele, chief investment officer at UBS Global Wealth Management, said in a note to clients. “But rising deposit costs and possible deposit withdrawals are likely to put pressure on industry earnings.”

Overseas, the pancontinental Stoxx Europe 600 index fell 1.4%. In Hong Kong, the Hang Seng index fell 3%, while in Japan, the Nikkei 225 fell 1.7%. China’s Shanghai Composite Index fell 1.4%.

In commodity markets, Brent, the international oil benchmark, rose 1.4% to $82.76.

Write to Jack Pitcher at jack.pitcher@wsj.com Will Horner at william.horner@wsj.com

Corrections & Amplifications
Western Alliance Bancorp was one of several banks whose shares plunged more than 20%. An earlier version of this article misspelled the company’s name as Western Alliance Bancorop. (Corrected March 10)