Stocks plunge on robust jobs report and interest fears

Stocks fell at the open on Friday due to disappointing earnings reports from blue-chip companies and as a robust US jobs report boosted bond yields and bolstered expectations that the pace of interest rate hikes could pick up.

All 30 components of the Dow Jones industrial average were lower and 10 of the 11 major S&P sectors fell, led by the energy index’s 1.83 percent decline.

The Dow was down more than 340 points at 12:30 p.m. after having briefly fallen more than 400 points. The S&P 500 fell 1 percent and Nasdaq declined 1.1 percent.

A Labor Department report showed nonfarm payrolls increased by 200,000 jobs in January, above the 180,000 rise expected by economists surveyed by Reuters. The unemployment rate stayed unchanged at a 17-year low of 4.1 percent.

Average hourly earnings rose 0.3 percent, building on December’s solid 0.4 percent gain. That boosted the year-on-year increase in average hourly earnings to 2.9 percent, the largest rise since June 2009.

After the payrolls data, traders boosted bets that the Federal Reserve will raise interest rates three times this year, with a hike next month seen as a near certainty. But fast-rising wages could prompt more aggressive action to keep a lid on inflation pressure.

“The market had coalesced around expectations for three rate hikes this year,” said Michael Antonelli, managing director at institutional sales trading at Robert W. Baird.

“Slightly hawkish comments and wage hikes will make it four. What is good for the average American worker ends up being negative for stocks because it increases the odds of further rate hikes.”


Leave a Reply