Stock indexes plunged on Friday, with the Dow Jones industrial average falling by more than 600 points mid-day.
“The S&P 500 and the Dow are both on track for their biggest one-week declines in more than two years,” Reuters reports. NASDAQ is on track to post the worst week since November 2016.
Friday began with news that wage growth is finally picking up. Investors expressed concern over the threat of inflation.
Concerns about rising interest rates pounded financial markets Friday as investors started to take the threat of inflation more seriously, a sharp shift from the sentiment that has characterized most of the stock market’s nearly nine-year bull-market run.
From National Public Radio:
The 2.4 percent drop in the Dow came as the Labor Department reported 200,000 jobs were added to the economy last month, which was stronger than expected, and the unemployment rate stayed at 4.1 percent — the lowest since 2000.
But worries about inflation grew when the report showed that average hourly wages grew 2.9 percent from a year ago — the largest increase since June 2009. Yields for 10-year Treasurys hit four-year highs Friday.
All this sets the stage for the Federal Reserve to continue raising interest rates, with the next hike expected in March.
What does this mean for you? Get ready for higher interest rates on loans and credit cards.
“It’s all about the bond market, the bond market is calling the tune for stocks and has been all week. We’ve seen a very large back-up in yields and that’s giving investors reasons to sell equities,” said Paul Nolte, portfolio manager at Amundi Pioneer Asset Management in Boston.
The better-than-expected January employment report showed a surge in job growth and the largest wage gain in more than 8-1/2 years, fueling expectations that rising inflation will prompt the Federal Reserve to hike interest rates more aggressively this year.
“The bond market sold off and the expectation is three maybe four rate hikes this year in light of the jobs report,” said Nolte.