S&P 500’s week worst since September

Index drops 1.4% Friday amid interest rate fears, failing bank

NEW YORK — Stocks tumbled on Friday, as the S&P 500 dropped 1.4 percent to cap its worst week since September amid worries about rising interest rates and a U.S. bank failure.

All told, the S&P 500 fell 56.73 points to 3,861.59. The Dow lost 345.22 to 31,909.64, and the Nasdaq dropped 199.47 to 11,138.89.

Wall Street already in February gave up on hopes that cuts to interest rates could come later this year.

Worries then flared this week that rates are set to go even higher than expected after the Fed said it could reaccelerate the size of its rate hikes.

A Friday jobs report helped calm some of those worries, which led to some up-anddown trading. Overall hiring was hotter than expected, which could be a sign the labor market remains too strong for the Fed’s liking.

But the data also showed a slowdown from January’s jaw-dropping hiring rate. More importantly for markets, average hourly earnings for workers rose by less in February than economists expected.

That’s crucial for Wall Street because the Fed is focusing on wage growth in particular in its fight against inflation. It worries too-high gains could cause a vicious cycle that worsens inflation, even though raises help workers struggling to keep up with rising prices at the register.

Some of the sharpest drops on Wall Street came from banking stocks on worries about who else may suffer a cash crunch if interest rates stay higher for longer and customers pull out deposits.

That would set up pain because a flight of deposits could force them to sell bonds to raise cash, right as higher interest rates knock down prices for those bonds.

Besides SVB Financial’s struggles, Silvergate Capital also said this week it’s voluntarily shutting down its bank. It served the crypto industry and had warned it could end up “less than well-capitalized.”

Stock losses were heaviest at regional banks. First Republic Bank tumbled

14.8 percent. It filed a statement with regulators to reiterate its “strong capital and liquidity positions.”

Charles Schwab lost another 11.7 percent after dropping 12.8 percent Thursday “as investors stretched for readthroughs” from the SVB crisis, according to analysts at UBS. The analysts called them “logical but superficial” because of differences in how companies get their deposits.

Larger banks, which have been stress-tested by regulators following the 2008 financial crisis, held up better.