Stocks Tumble, Bonds Rally as Financial Sector Hit

U.S. stocks slid to session lows as a rout in bank shares picked up steam on concerns pockets of trouble in the sector could portend broader dangers. Treasuries rallied.

The S&P 500 lost more than 1.5%, with financial companies in the index plunging more than 3%. The KBW Bank Index, which includes regional lenders, plunged 7%. Banks came under fire after Silvergate Capital Corp. collapsed overnight amid growing scrutiny in Washington. SVB Financial Group plummeted by a record amount following a volatility halt.

“Everybody has been concerned that higher interest rates will lead to higher defaults at some point in 2023, and this raises those questions even more,” said Matt Maley, chief market strategist at Miller Tabak + Co.

Cryptocurrencies slid with Bitcoin falling to a seven-week low amid Silvergate’s meltdown.

“Banks and semis are two groups that historically have been very good leading indicators. Typically, markets can do OK if either of them are languishing, but when one of them is having an outsized move it’s usually wise to listen,” said Jonathan Krinsky, chief market technician at BTIG. “In this case, the outsized move is clearly banks to the downside.”

President Joe Biden unveiled a $6.9 trillion budget proposal where the administration forecast inflation would slow to 4.3% this year while the unemployment rate will climb.

Thursday’s data showed weekly jobless claims had risen to 211,000 during the week ending March 4, ahead of expectations for 195,000 and marking the first time claims surpassed 200,000 since early January.