Stocks lower after positive jobs report spurs concerns of Fed interest hike

03 February, 2018, 11:31 | Author: Martin Tyler

Analysts have been eyeing an increase in United States bond yields that accelerated further on Friday after a stronger-than-expected U.S. jobs report raised expectations more Federal Reserve interest rate increases could be coming.

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.

USA stocks fell sharply Friday, with the Dow Jones industrial average experiencing its worst weekly percentage drop in two years.

Rising yields have encouraged investors to pull their money out of equities, which are perceived as riskier assets. Revenues have also been stronger than expected, an indication that the improving global economy is translating into better sales. Even with the pullback, the major indexes are still up more than 3 per cent this year.

Trump's Twitter feed was silent Friday on the market downturn.

The plunge comes after record-breaking stock market gains under President Trump's first year in office.

. As recently as 2016, a fall of 600 points on the Dow marked a almost 3.4 percent sell-off.

While the point swing was eye-popping, in terms of the percent of the loss in a market that saw the Dow crash downward through 26,000, the decline did not appear to alarm many investors.

The S&P 500 Index fell 2.1 percent to 2,761.91 at 4 NY.

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The Standard & Poor's 500 index dropped 59 points, or 2.1 percent, to 2,762.

The increase in rates has been driven by the prospect of stronger economic growth, and higher inflation, in the USA and overseas.

Bond prices declined again Friday, sending yields higher.

The yield on the key 10-year Treasury spooked markets by reaching new highs at 2.84 percent.

This morning's 1.2% decline in the US Dow Jones Industrial Average was led by a 5.2% decline in Exxon Mobil, which disappointed both on earnings and production. And investors anxious it could prompt the Federal Reserve to raise interest rates faster than expected.

Those concerns were fueled by Friday reports on increasing wages and tightening labor markets, reflecting of a muscular economy that could veer out of control. Meanwhile wages rose sharply, suggesting employers are competing more fiercely for workers.

That's good news for Main Street USA, but not for Wall Street.

"For months I've been saying the market is underestimating what the Fed will do in raising interest rates", Jurrien Timmer, director of global macroeconomics for Fidelity Investments, told NBC News.

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The market slide may have been overdue, particularly after the strong start for stocks this year where the S&P 500 had its best January in two decades. Their goal was to incentivize investors to put their cash to work in the economy - such as by buying corporate stocks and bonds - rather than stashing it in the relative safety of government bonds. We have these corrections.

O'Hare said disappointing earnings added to the selling momentum.

Google-parent Alphabet also reported quarterly results, with earnings per share missing expectations. Shares in Exxon shed $5.19 to $83.88. Chevron gave up $3.37 to $122.20.

Apple declined 3.4 percent after the technology company said it sold 77.3 million iPhones in the last quarter, below the 80 million analysts expected.

The Baker Hughes rig count increased to 1,288 from 1,285. Amazon shares gained $63.78 to $1,453.78.

In currency markets, the Canadian dollar closed at an average trading value of 80.78 cents USA, down 0.60 of a U.S. cent.

US crude fell $1.02 to $64.78 per barrel and Brent fell $1.34 to $68.31. Natural gas slipped 1 cent to $2.85 per 1,000 cubic feet. "Did you think 7 percent was going to be a normal monthly gain?"

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