US stocks dive on rate hike worries

Traders worked the floor of the New York Stock Exchange Friday

Drew Angerer Getty Images Traders worked the floor of the New York Stock Exchange Friday

"The big picture concern is that wage growth will pick up and lead to more inflation", said Nicholas Colas, co-founder at DataTrek Research.

"It's all about the bond market, the bond market is calling the tune for stocks and has been all week".

The S&P 500 on Friday fell 59.85 points, or 2.1 percent, to 2,762.13.

The Russell 2000 index of smaller-company stocks on Friday gave up 32.59 points, or 2.1 percent, to 1,547.27, shedding 3.8 percent from a close of 1,608.06 on January 26.

The S&P 500, which many index funds track, last month soared 5.6 percent, its biggest monthly gain since March 2016. The "good news, bad news" can feel like a whipsaw for investors and shows the delicate balance of keeping the economy's fire humming - one that analysts say Trump is dumping gasoline on by adding tax cuts to an economy already on the upswing. Apple and Chevron also fell.

Sony, which recently posted stellar quarterly earnings, especially in its entertainment division, was the only major media conglomerate to trade higher on Friday, closing up 6 percent. The e-commerce giant rose 2.9 per cent after its fourth-quarter profit increased by more than $1 billion.

Comcast Corp. similarly fell 3% from Monday's opening price of $42.22 to Friday's close at $41.11. But the stock fell 4.4 percent after the company said it expects profit margins of 38 percent to 38.5 percent, tighter than the expected 38.9 percent. The tandem selling accelerated after Dallas Fed President Robert Kaplan suggested officials may need to hike more than three times this year to cool the advance.

The financials group slipped 1.1 per cent. Bank of Nova Scotia gave back 0.7 per cent to $80.15, and Canadian Imperial Bank of Commerce lost 0.9 per cent to $119.96.

Gold futures and copper prices both decline.

Those factors could help to underpin USA earnings even after the tax benefit is priced in.

That helped the yield on 10-year Treasuries surge to 2.845% which is the highest it has been since January of 2014, which means that Treasuries returns could become more attractive than stocks.

Stocks were also rattled as the yield on the 10-year Treasury note hit a four-year high after Friday's payrolls report. Market analysts pointed to the clash between the Trump administration and the Federal Bureau of Investigation as another concern. The best performer is Walmart Inc. shares, which is up 0.4%. The euro weakened to $1.2451 from $1.2502.

- The Japanese yen fell 0.7 percent to 110.144 per dollar, the weakest since January 23.

Investors headed for the exits amid growing fears over a bond market rout, triggered by early signs of inflation in the U.S. as economic growth accelerates and wages appear to finally be rising after years of stagnation. Brent crude, used to price worldwide oils, fell $1.07, or 1.5 per cent, to close at $68.58 a barrel in London.

Gold fell $10.60 to $1,337.30 an ounce.

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