A government jobs report has provided some positive economic news amid the banking crisis, causing regional bank stocks to rebound sharply.
Regional bank shares rallied premarket and extended those gains in early trading Friday.
The spike comes after a bruising session on Thursday.
The turnaround came as a government jobs report beat market forecasts for both payroll growth and the unemployment rate, despite banking sector turmoil and a slowing economy.
PacWest led the charge in the regional bank stock rebound, jumping nearly 55 percent by 10:30 a.m. ET on Friday.
The jump erased the prior day’s losses.
The California-based bank, which recently announced that it was considering a range of strategic options, including a sale, saw its shares plunge to close 50 percent down on Thursday.
The SPDR S&P Regional Banking ETF jumped nearly 5 percent as of 10:30 a.m. ET on Friday.
The bank had ended up closing roughly 4.5 percent down the day prior.
Western Alliance, which on Thursday labeled media reports that it was looking to sell as “categorically false,” saw its shares up around 32 percent as of 10:30 a.m. on Friday.
The Arizona-based lender closed 38.5 percent down on Thursday.
The Phoenix-based bank got a likely boost from a note from JPMorgan.
JPMorgan upgraded Western Alliance—along with Zions Bancorp and Comerica—to overweight.
JPMorgan analysts said in the note that the three banks seemed “substantially mispriced,” with short-selling activity partly to blame.
Short-selling of financial stocks was temporarily banned in 2008 to stem the market meltdown.
The practice has again come under renewed scrutiny amid the recent bank stock rout.
On Thursday, White House Press Secretary Karine Jean-Pierre said that the Biden administration was going to “closely monitor” market developments.
Those actions being monitored included short-selling pressure on healthy banks.
Jean-Pierre made the comment when asked if the Biden administration was looking to impose a stop on short-selling bank stocks.
Adding impetus to Friday’s bank stock rebound was a forecast-beating jobs report, which showed the labor market surprisingly resilient despite the ongoing troubles in the banking sector and signs of a slowing economy.
Despite the financial sector turbulence sparked by the failure of Silicon Valley Bank in mid-March—and a few other failures since—the latest nonfarm payrolls report from the Bureau of Labor Statistics (BLS) showed that jobs in finance rose by 23,000 in April.
Overall payroll gains of 253,000 in April were more substantial than market forecasts of 180,000.
Meanwhile, the unemployment rate ticked down to 3.4 percent, defying predictions for it to hold steady at 3.5 percent.
While employment growth has slowed, job losses haven’t yet been that significant—at least not in light of the deteriorating economic indicators and the banking sector turmoil.
The latest report from Challenger, Gray & Christmas showed that hiring is 81 percent lower so far this year compared with the year-ago period.
Job cuts in April fell to their lowest point of the year, at 66,995.
The number is significantly down 25 percent from the 89,703 cuts announced in March.
So far this year, U.S. employers have announced plans to cut 337,411 jobs, a 322 percent increase over the same period last year.
Financial firms have cut 33,356 jobs so far in 2023.
That’s a 285 percent increase from the 8,675 cuts announced through April 2022.
“Finance, both traditional and digital, are grappling with rate increases and the potential for lower consumer spending, just as retail and consumer manufacturers are,” Andrew Challenger, labor and workplace expert and senior vice president of Challenger, Gray & Christmas, said in a statement.
“We’ve also seen large banks fail recently, which will mean a more cautious approach in the sector going forward.”
Retail led all industries in April in terms of job cuts, with 14,689.
So far this year, retailers have announced 36,115 cuts, an 843 percent increase compared to the same period last year.
Consumer spending, which accounts for around two-thirds of U.S. economic output, slowed to a crawl in March, advancing just 0.1 percent over the month.
“Retailers and consumer goods manufacturers are preparing for a tightening in consumer spending, particularly with the Fed’s hike to interest rates in an attempt to control inflation,” Challenger said.
Regional banks, which disproportionately have client deposits parked in interest rate-sensitive investment portfolios like mortgage bonds, have been facing difficulties since the Federal Reserve embarked on an aggressive tightening cycle last March in a bid to quash high inflation.
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