Job growth in the United States remains strong

Push and pull made for a hectic day. The stocks started with small gains before turning back. By midday, the S&P 500 was down about 0.7 percent.

Despite the volatility in the stock market, the root cause has remained the same: Still, public anxiety on Wall Street is about how interest rates will rise, and what that means for the economy. Jobs data has informed the pace of upcoming interest rate hikes, while pressure in bank stocks reflects the pain these rate hikes have caused so far.

“The economic story is consistent. Raising interest rates slows the economy and that weighs heavily on the American economy,” said Lorraine Goodwin, an economist at New York Life Investments. “What happens to the banking sector is an indication of what investors fear could happen to other parts of the economy.” economy if interest rates continue to rise.

Before Friday’s turbulent trading, the outlook turned bleak this week after Federal Reserve Chairman Jerome H. Powell told lawmakers that the central bank may have to raise interest rates more than expected, possibly at a faster pace. Higher interest rates affect stock prices, and increase the risk that the Fed’s actions could push the economy into recession.

Friday’s jobs report for February alleviated those concerns somewhat. Investors have sharpened sluggish wage growth and rising unemployment, in part because more people are returning to the workforce. Two data points suggesting the Fed’s efforts to slow the economy and rein in inflation may work.

Some analysts have said the numbers will take pressure off the Fed when it meets later this month, and the bets in financial markets tend to be on a smaller quarter-point increase, as opposed to a larger half-percentage-point increase favored earlier. the week.

“I think most people would agree that it’s not going to happen,” Christina Huber, chief global market strategist at Invesco, said of the possibility of a March rate hike.

However, others are less hopeful that the latest data on the jobs market will remain in the hands of the Federal Reserve. Underneath the headlines were signs that wages continue to rise for parts of the workforce and that strong hiring remains a cause for concern, said Ron Temple, chief market strategist at Lazard. The United States added more than 300,000 new jobs in February, nearly 100,000 more jobs than economists had expected.

“The pace of job creation is still very hot,” Mr. Temple said.

Divided investor sentiment points to the potentially critical impact of next week’s reading on consumer price inflation to determine what the Fed is likely to do when it meets later this month.

Adding to the Fed’s deliberations are concerns about the state of the financial system, as investors and depositors scrambled to pull their money out of Silicon Valley Bank, a prominent bank for start-ups.

The SVB, based in Santa Clara, California, said on Wednesday that it needed to take immediate steps to shore up its finances amid a dark environment for startups and other technology companies. The statement led to a decline in the bank’s shares, which spread to the banking sector in general and led to sharp moves in the government bond markets.

On Friday morning, the Silicon Valley bank closed and floated Under the control of the Federal Deposit Insurance Corporation. The KBW Nasdaq Bank Index fell another 2 percent, with other small bank stocks dropping sharply. First Republic Bank in San Francisco and Signature Bank in New York fell more than 20 percent. Trading in major banks such as JPMorgan Chase and Bank of America, which slipped on Thursday, was more stable on Friday.

Testifying before the House Ways and Means Committee on Friday, Treasury Secretary Janet Yellen said she has been monitoring the situation regarding Silicon Valley Bank. “I will just say, you mentioned Silicon Valley Bank, there are recent developments that concern quite a few banks that I watch very carefully. When banks experience financial losses, it has to be a concern.”

Alan Rapport Contribute to the preparation of reports.