Wall Street sinks on jitters about banks

STORY: Wall Street’s main indexes plunged Friday as investors feared for the health of U.S. banks after regulators were forced to shut down one of the tech industry’s most high-profile lenders.

It was the largest bank failure since the financial crisis – and it helped drive the Dow down a percent, the S&P 500 roughly one-and-a-half percent and tech-heavy Nasdaq a percent-and-three-quarters.

California banking regulators on Friday said they closed SVB Financial Group to protect deposits. SVB, which operates Silicon Valley Bank, had tried but failed to shore up its balance sheet through a stock sale proposed earlier this week.

The news overshadowed the February jobs report, which – while reflecting a still-robust labor market – showed wage inflation cooling and an unemployment rate that ticked up two-tenths of a percent.

The data had eased some concerns that the Fed could raise rates by 50 basis points at its March meeting after hawkish remarks from Fed Chair Jerome Powell earlier in the week.

But investors were more focused on the SVB meltdown, says Geetu Sharma, founder and investment manager of AlphasFuture LLC.

“Today’s action in the market is totally driven by the risk-off sentiment due to the collapse of SVB and not so much the jobs report. Because I think the market is really concerned about this emerging risk of financial instability and going into safe havens, which is driving yields down, and potentially a Lehman-like scenario emerging, which we don’t know yet….”

In individual stocks, Gap lost 6.1% after the apparel retailer posted a bigger-than-expected fourth-quarter loss and forecast full-year sales below Wall Street estimates.

And Oracle slid 3% after the software firm missed third-quarter revenue estimates.