The S&P 500 (SP500) on Friday fell 4.55% for the week to settle at 3,861.59 points, posting losses in three out of five sessions. Its accompanying SPDR S&P 500 Trust ETF (NYSEARCA:SPY) fell 4.52% for the week.
The benchmark index’s retreat marked its worst weekly performance since September last year. Sentiment was dampened by Federal Reserve chair Jerome Powell’s hawkish testimony to the Senate and the 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 economic data coming in stronger than expected, the central bank was open to higher interest rates. The Fed chief also stressed that policymakers had not made a decision yet on ratcheting up rate hikes. His comments were perceived as hawkish by traders, who sharply recalibrated upwards their expectations to 80% for a 50 basis point rate hike at the upcoming monetary policy committee meeting later this month.
Headlines were dominated on Thursday and Friday by the liquidation of crypto-friendly bank Silvergate (SI) and the collapse of SVB Financial (SIVB) unit Silicon Valley Bank. Both events – especially the liquidity crisis at the latter – reverberated across the financial sector and sent other bank stocks lower.
Silicon Valley Bank on Friday was taken over by the Federal Deposit Insurance Corporation. It was the biggest bank failure since the 2008 financial crisis. Several Wall Street analysts, however, said that the retreat in bank stocks caused by the saga was an overreaction and not indicative of systemic weakness. Regardless, the event caused market participants to again 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 was largely centered around the labor market. On Wednesday, ADP private payrolls for February came in above consensus, while January JOLTS figures fell less than anticipated. Both sets of data pointed to continued resilience in the labor market. Conversely, in a sign of some cooling, the number of Americans filing for weekly jobless claims came in unexpectedly higher on Thursday, topping the 200K mark for the first time in January.
The economic calendar culminated with the highly anticipated jobs report on Friday, which painted a mixed picture. Nonfarm payrolls rose more than expected, while the unemployment rate strengthened. Average hourly earnings rose but not as much as expected.
Turning to the weekly performance of the S&P 500 (SP500) sectors, all 11 ended in the red, with Financials cratering more than 8% amid the Silicon Valley Bank saga. Consumer Staples fell the least. See below a breakdown of the weekly performance of the sectors as well as their accompanying SPDR Select Sector ETFs from March 3 close to March 10 close:
#1: Consumer Staples -1.92%, and the Consumer Staples Select Sector SPDR ETF (XLP) -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 Health Care Select Sector SPDR ETF (XLV) -3.89%.
#5: Communication Services -4.11%, and the Communication Services Select Sector SPDR Fund (XLC) -4.57%.
#6: Industrials -4.46%, and the Industrial Select 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 Consumer Discretionary Select Sector 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 Materials Select Sector SPDR ETF (XLB) -7.59%.
#11: Financials -8.50%, and the Financial Select Sector SPDR ETF (XLF) -8.50%.
Below is a chart of the 11 sectors’ YTD performance and how they fared against the S&P 500. For investors looking into the future of what’s happening, take a look at the Seeking Alpha Catalyst Watch to see next week’s breakdown of actionable events that stand out.