Wall Street plummets on Thursday as bank stocks tumble

All three major indexes on Wall Street plummeted on Thursday as numerous U.S. banking firms saw drops in their stock prices.

The Dow Jones Industrial Average finished at 32,254.86, down 543.54 points or 1.66 percent. The S&P 500 concluded the trading session at 3,918.32, losing 73.69 points or 1.85 percent. Meanwhile, Nasdaq ended at 11,338.35, falling by 237.65 points or 2.05 percent.

Thursday's losses put the Dow Jones below its 200-day moving average for the first time in five months. The Dow Jones is down 2.7 percent for the year and on track to lose more than 3.4 percent this week.

Meanwhile, the S&P 500 and Nasdaq are still up 2.05 percent and 8.33 percent, respectively, in 2023. However, both indexes are on track to record weekly losses of more than three percent.

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Earlier in Thursday's trading session, all benchmark indexes rallied after the U.S. Department of Labor reported that unemployment claims rose to a five-month high. Jobless claims climbed to 211,000 last week against the initial estimates of 195,000.

TradeStation vice president of market intelligence David Russell said the jobless claims data provided "some relief" to the equity market.

However, later in the session, bank stocks dragged down the market. Shares of SVB Financial plunged by 60 percent after it announced a $1.75 billion sale of its stocks. Silvergate Capital also lost over 42 percent of the value of its shares after deciding to liquidate its crypto-friendly bank, Silvergate Bank. Signature Bank, another amenable bank in the crypto community, fell by 12.18 percent.

Bank of America (BofA) and Wells Fargo also tumbled by over six percent each. In total, the four largest U.S. banks — BofA, Wells Fargo, JPMorgan and Citigroup — lost $56 billion in market value that day.

At the closing bell, the financial sector within the S&P 500 index collectively lost 4.1 percent, its worst performance since June 2020.

Key jobs report

Analysts said investors are now eyeing February's jobs report that will be published on Friday, especially after Fed chairman Jerome Powell said in front of Congress that the central bank would make rate hike decisions based on economic data.

"The Fed has changed the narrative that drove stocks higher for most of January and late December," Adam Sarhan, CEO of 50 Park Investments, said.

"The market rallied on the assumption that the Fed would stop raising rates, would pause in the summer — or sometime in the near future. Powell made it very clear that's just not the case."

The unemployment rate was the lowest in five decades in January. At the same time, the country saw an additional 517,000 payrolls. Analysts forecast that the U.S. will see a 205,000 payroll increase for February, which is significantly lower than the previous month. However, this decline will only do little to minimize the impact of the payroll jump in January.

The market predicts that the Fed will increase interest rates to the range of 5.5 to 5.75 percent by September. Financial firm CME Group reported that around 61 percent of investors now expect a 50-basis-point increase in interest rates at the Federal Open Market Committee meeting later this month.

Pressures on oil market

Oil prices were also under pressure on Thursday after recession fears heightened due to Powell's testimony on Capitol Hill, which indicated that the central bank was ready to fasten its monetary tightening pace.

Brent futures tumbled 1.3 percent to $81.59 a barrel, its lowest point since February 22. The U.S. West Texas Intermediate (WTI) crude fell by 1.2 percent to $75.72 a barrel, its lowest close in two weeks.