The selloff resumed on Wall Street as risk-off sentiment dominated the broad markets ahead of the US February non-farm payroll. The catalyst for the broad selloff was triggered by SVB Financial Group after the bank announced that it was raising more than $2 billion in new capital to help offset losses, with its shares plummeting 60%. This dragged on other financial stocks, with major US banks, including JPMorgan Chase, Citigroup, and Well Fargo down between 3-6%.
It is a “bad news is bad news” time for the financial markets as recession risks have been largely increased after Fed Chair Powell vowed more aggressive rate hikes. The jobless claims jumped about 10% to 211,000 for the week ended 4 March, the highest level since 24 December 2022, which suggests that the upcoming job data may not be rosy.
While all the risk assets, such as equities, commodity currencies, and energy prices fell sharply, investors shifted investment funds to haven assets, including bonds, gold, the Eurodollar, and the Japanese Yen. Another major event for today will be the Bank of Japan’s policy meeting, which is the last meeting that is held by the current governor, Kuroda Haruhiko before he ends the term. Yen strengthened after Japan reported weak Q4 GDP data on Thursday as market participants bet on more policy tweaks by the central bank.
The fear gauge, Volatility Index, spiked 17% to above 22 overnight, also indicating that investors’ sentiments were getting sour. Notably, the US bond yields retreated sharply, particularly in the 2-year notes, down 16 basis points, to 4.9% after it hit 5.1%, the highest level since 2007.
Asian markets are set to open sharply lower. The ASX futures fell 0.98%. The Hang Seng Index futures slumped 1.32% and Nikkei 225 futures were down 1.09%.Click to enlarge the table
- All the 11 sectors in the S&P 500 finished lower, with financial stocks leading losses, plunging nearly 4%. JPMorgan Chase slumped 5.5%, Citigroup Inc. slipped 3.8%, and Wells Fargo & Co fell 6%. Materials, Consumer Discretionary, and Communication services were also the biggest laggards, were all down more than 2%. All the major tech shares fell between 1-5%.
- Crypto-friendly bank, Silvergate Captial plunged 42% after it announced to wind down operations and a liquidation plan. The bank was hit by customer withdrawals following FTX’s collapse.
- JD.com’s stocks slumped 11% amid a sharp drop in its revenue growth in the fourth quarter. China’s second-largest e-commerce giant’s final quarter revenue rose 7% annually, down from 23% growth a year ago. The company also declared a $1 billion dividend for shareholders.
- Crude oil dropped for the third straight trading day due to the Fed-induced selloff. Recession fears again become the major bearish factor for the energy markets. The WTI futures fell below the 50-day moving average again, heading to the low of $73 per barrel in late February.
- Gold futures rebounded from the 100-day moving average as the US dollar softened and bond yields retreated. The precious metal is also seen as one of the haven assets in favour of investors in the risk-off sentiment.
- Cryptocurrencies tumbled following Silvergate Capital’s announcement to wind down operations and voluntarily liquidate. Both Bitcoin and Ethereum slumped 8% amid the news, hitting their lowest levels since mid-January.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.