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U.S. stock futures slipped on Friday ahead of the release of the pivotal jobs report, as investors also focus on the stress in the banking sector.
What’s happening
-
Dow Jones Industrial Average futures
YM00,
-0.20%
fell 164 points, or 0.5%, to 32360. -
S&P 500 futures
ES00,
-0.04%
dropped 14 points, or 0.4%, to 3906. -
Nasdaq 100 futures
NQ00,
+0.24%
decreased 2 points, or 0%, to 12143.
On Thursday, the Dow Jones Industrial Average
DJIA,
fell 544 points, or 1.66%, to 32255, the S&P 500
SPX,
declined 74 points, or 1.85%, to 3918, and the Nasdaq Composite
COMP,
dropped 238 points, or 2.05%, to 11338.
What’s driving markets
Attention turns to the release of the nonfarm payrolls report, after Federal Reserve Chair Jerome Powell this week said the “totality” of jobs and inflation data would determine whether the central bank would go back to 50 basis point hikes.
Economists polled by the Wall Street Journal expect 225,000 jobs outside the farm sector will have been created in February, and for the unemployment rate to stay at 3.4%. The Labor Department releases the report at 8:30 a.m. Eastern.
Worries about the health of banks contributed to nervousness, after SVB Financial
SIVB,
said it planned to sell equity to cover a nearly $2 billion hole, caused by the sale of a loss-making U.S. Treasury securities portfolio. This comes after Silvergate Capital
SI,
this week said it would liquidate its banking subsidiary, and after KeyCorp
KEY,
warned marginal funding costs are increasing with rising market interest rates, and are expected to weigh on net interest income.
SVB Financial shares slumped 34% in premarket trade.
The SPDR S&P Regional Banking ETF
KRE,
skidded 8% on Thursday. European banks including Deutsche Bank
DB,
dropped sharply on Friday.
Following the 2008 financial crisis, banks had to buy Treasury securities to help provide a cushion against unexpected losses. This cushion now is turning out to be the source of difficulties. The Federal Deposit Insurance Corp. said banks collectively had $620 billion worth of unrealized losses in their portfolios as of the end of the fourth quarter, which it calls “elevated.”
The inversion of the yield curve is weighing on banks, that traditionally borrow short and lend long. The 2-year
TMUBMUSD02Y,
was yielding 4.84% early on Friday, and the 10-year
TMUBMUSD10Y,
was yielding 3.86%.
The dollar rose against the Japanese yen
USDJPY,
after the Bank of Japan made no changes to its monetary policy stance in the last meeting for Gov. Haruhiko Kuroda ahead of Kazuo Ueda taking over.
