The S&P 500 (SP500) on Friday fell 4.55% to settle at 3,861.59 points, registering losses in three of the five sessions. Your Companion SPDR S&P 500 Trust ETF (NYSEARCA:SPY) fell 4.52% for the week.
The retracement of the reference index marked its worst weekly performance since September of last year. Sentiment was dampened by hardline Federal Reserve Chairman Jerome Powell’s testimony before the Senate and House, hot economic data and two significant negative developments in the financial sector.
Powell, in his two-day testimony on the semi-annual monetary policy report, said that in light of recent better-than-expected economic data, the central bank was open to higher interest rates. The Fed chief also stressed that policymakers had not yet made a decision on intensifying rate hikes. His comments were perceived as aggressive by traders, who sharply recalibrated their expectations upwards to 80% for a 50 basis point rate hike at the next monetary policy committee meeting later this month.
Headlines were dominated on Thursday and Friday by the liquidation of crypto bank Silvergate (SI) and the collapse of unit SVB Financial (SIVB) Silicon Valley Bank. Both events, especially the liquidity crisis in the latter, had repercussions throughout the financial sector and caused other bank stocks to fall.
Silicon Valley Bank was taken over Friday by the Federal Deposit Insurance Corporation. It was the biggest bank failure since the 2008 financial crisis. However, several Wall Street analysts said the decline in bank shares sparked by the saga was an overreaction and not an indication of systemic weakness. Regardless, the event caused market participants to further adjust their expectations for a 50 basis point hike to less than 40% as they reassessed the Fed’s willingness to possibly threaten financial instability with continued rate hikes.
Economic data during the week focused largely on the labor market. On Wednesday, ADP private payrolls for February topped consensus, while JOLTS figures for January fell less than expected. Both sets of data pointed to continued resilience in the labor market. By contrast, in a sign of some cooling off, the number of Americans filing weekly jobless claims rose unexpectedly on Thursday, surpassing the 200K mark for the first time in January.
The economic calendar culminated with Friday’s highly anticipated jobs report, which painted a mixed picture. Nonfarm payrolls rose more than expected, while the unemployment rate strengthened. Median hourly earnings increased, but not as much as expected.
Looking at weekly sector performance for the S&P 500 (SP500), all 11 sectors finished in the red, with the financials sector tumbling more than 8% amid the Silicon Valley Bank saga. Consumer staples fell the least. See below for a breakdown of weekly sector performance, as well as the corresponding SPDR Select Sector ETFs from the March 3 close to the March 10 close:
#1: Consumer Staples -1.92%and the SPDR (XLP) Select Consumer Staples Sector ETF -1.97%.
#2: Utilities -2.88%and the Utilities Select Sector SPDR ETF (XLU) -2.76%.
#3: Information Technology -3.06%and the Technology Select Sector SPDR ETF (XLK) -3.12%.
#4: Health Care -3.95%and the Select Health Care Sector SPDR ETF (XLV) -3.89%.
#5: Communication Services -4.11%and the Select Communication Services Sector (XLC) SPDR Fund -4.57%.
#6: Industrial -4.46%and the Select Industrial Sector SPDR ETF (XLI) -4.50%.
#7: Energy -5.35%and the Energy Select Sector SPDR ETF (XLE) -5.31%.
#8: Consumer Discretionary -5.55%and the Select Sector Consumer Discretionary SPDR ETF (XLY) -5.54%.
#9: Real Estate -7.00%and the Real Estate Select Sector SPDR ETF (XLRE) -6.84%.
#10: Materials -7.64%and the SPDR Materials Select Sector ETF (XLB) -7.59%.
#11: Finance -8.50%and the SPDR Select Financials ETF (XLF) -8.50%.
Below is a chart of the YTD performance of the 11 sectors and how they fared against the S&P 500. For investors looking ahead of what’s going on, take a look at Seeking Alpha Catalyst Watch for a breakdown of the actionable events of the coming week that stand out. .
