US stocks dive on rate hike worries, Dow sinks more than 650 points
US stocks plunged Friday on worries about rising interest rates following a better-than-expected jobs report as the torrid Wall Street rally that opened the year flamed out dramatically.
The Dow alone slumped more than 650 points, or 2.5 percent to 25,520.96.
Equity markets elsewhere were also weak, with Tokyo, London, Paris and Frankfurt all falling. The dollar gained on expectations of more Federal Reserve interest rate hikes, while oil prices slid.
But it was Wall Street itself where the moves were most dramatic, selling off on the latest indication of a tightening labor market.
The US economy added 200,000 jobs in January, with unemployment holding at 4.1 percent.
Equally important, hourly wages rose 0.3 percent from the prior month to $26.74, putting worker pay up 2.9 percent compared to January of last year, the largest 12-month gain since June 2009.
"It has been quite a while since we have had the stock market in a 'good news is bad news' mode," said Gorilla Trades strategist Ken Berman.
"Once again, this is 'good news' for workers, but it hints that wage inflation is taking hold, and that can be 'bad news' for the stock market. It gives the Federal Reserve a 'green light' on more rate hikes this year, and that historically makes the stock market nervous."
Analysts have been eyeing a recent increase in US bond yields that accelerated further on Friday following the jobs data.
"What's been bothering the market is the speed with which they're going up," Briefing.com analyst Patrick O'Hare said of higher Treasury yields.
"Everyone has to remember we had a very over-extended market," O'Hare said. "You now have group think driving things the other way as the trading trends shifts."
O'Hare said lackluster earnings added to the selling momentum, with some of the biggest US companies suffering dramatic declines after disappointing the market. Apple, Google-parent Alphabet, Chevron and ExxonMobil all fell more than four percent.
Troublesome headlines from Washington over the disputed release of Republican memo about investigations of Donald Trump's election campaign were "another negative news item," but not the driver of Friday's selling, O'Hare said.
- Jobs crutch for dollar -
"The dollar clearly needed support this week, and January's impressive US jobs data has come to the rescue," said research analyst Lukman Otunuga at FXTM online currency brokerage.
But analyst Craig Erlam downplayed the size of the gains by the dollar gains.
"Not an overly large move in USD when you consider size of beat on earnings and a small beat on NFP (nonfarm payrolls). Sign of USD unpopularity right now?" he tweeted.
The dollar has been struggling against its major peers recently.
With dealers betting on tighter monetary policy at the European Central Bank and preferable terms for Britain when it leaves the European Union, the euro and pound have been making gains against the dollar the past couple of weeks.
Key figures around 2200 GMT
New York - DOW: DOWN 2.5 percent at 25,520.96 (close)
New York - S&P 500: DOWN 2.1 percent at 2,762.13 (close)
New York - Nasdaq: UP 2.0 percent at 7,240.95 (close)
London - FTSE 100: DOWN 0.6 percent at 7,443.43 points (close)
Frankfurt - DAX 30: DOWN 1.7 percent at 12,785.16 (close)
Paris - CAC 40: DOWN 1.6 percent at 5,364.98 (close)
EURO STOXX 50: DOWN 1.5 percent at 3,524.97
Tokyo - Nikkei 225: DOWN 0.9 percent at 23,274.53 (close)
Hong Kong - Hang Seng: DOWN 0.1 percent at 32,601.78 (close)
Shanghai - Composite: UP 0.4 percent at 3,462.08 (close)
Euro/dollar: DOWN at $1.2453 from $1.2507 at 2200 GMT
Pound/dollar: DOWN at $1.4116 from $1.4263
Dollar/yen: UP at 110.18 yen from 109.39 yen
Oil - Brent North Sea: DOWN $1.07 at $68.58 per barrel
Oil - West Texas Intermediate: DOWN 35 cents at $65.45 per barrel