The January jobs report, released Friday, was strong - with unemployment holding steady at the 17-year low of 4.1 percent and wages increasing by almost 3 percent from a year ago. Strength in the labor market caused a selloff in the US government bond market. and that has pushed up the yield on the 10-year Treasury note above 2.85%, its highest level since January 2014, or four years ago.
The yield on the key 10-year Treasury spooked markets by reaching new highs at 2.84 percent.
Solid jobs data that underscored the strength of the economy sent bond bulls scurrying and rattled equity investors who haven't seen a week this bad in two years. It sets the stage to make credit cards, vehicle loans and mortgages more expensive.
The Dow fell 665 points, or 2.5 percent to 25,520 Friday, and the S&P 500 fell 2.1 percent to 2,762.
None of the indexes were close to 5 percent Friday, which is considered by some to be the start of a correction.
Equally important, hourly wages rose 0.3 per cent from the prior month to US$26.74, putting worker pay up 2.9 per cent compared to January of past year, the largest 12-month gain since June 2009. In the three weeks through January 24, investors have pushed a net $18.3 billion into US stock funds this year, according to estimates from the Investment Company Institute.More news: Haas leads the way in Phoenix as Spieth struggles early
The S&P 500 Index fell 2.1 percent to 2,761.91 at 4 p.m.in NY.
Carl Tannenbaum, chief economist at Northern Trust, says Friday's employment report shows the economy continues to have a lot of energy.
The yield on 10-year Treasury notes, the benchmark for interest rates, has risen swiftly, stoking investor concerns that higher rates could weigh on company earnings and equity prices.
NPR's Jim Zarroli reports: "Now, investors are starting to think, maybe things are moving too fast. It's the 10-year going up because the market sees inflation going up". "They're normal. Stock prices can't keep rising at these levels".
Adding to the pressure were disappointing earnings reports from major companies.
Google's parent company Alphabet slumped 4.9 percent after the search giant reported results that missed analysts' forecasts.More news: John Wall out for All-Star game. Will Dragic be his replacement?
The Baker Hughes rig count increased to 1,288 from 1,285.
The Canadian dollar was trading 1 per cent lower at 80.65 US cents. The tech selloff worsened, sending the Nasdaq 100 index lower by 2.1 per cent.
The dollar rose to 110.28 yen from 109.42 yen on Thursday. Amazon shares gained $62 to $1,452. On the Nasdaq, 2,161 issues fell and 617 advanced.
The euro declined 0.4 percent to $1.2457. Brent crude, used to price global oils, fell 91 cents, or 1.3 percent, to $68.74 per barrel in London.
Exxon Mobile sank 5 percent and Chevron lost 1.8 percent. Hong Kong's Hang Seng index dipped 0.1 percent.
Gold posted the biggest weekly drop since early December.More news: Google Announces Rollout Of YouTube Live TV To Roku And Apple TV
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