USA bond market rout fears trigger Wall Street sell-off

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

None of the indexes were close to 5 percent Friday, which is considered by some to be the start of a correction. "And then you get a report, and that's the straw that breaks the camel's back, and that's kind of what we got into today".

Bob Doll, chief equity strategist at Nuveen Asset Management, had expected a slow move to 3 percent by the end of the year, and his target was higher than some. Improving levels of pay could lead companies to hike their prices to compensate for higher wage bills - leading to an inflationary spiral.

Art Cashin, director of floor operations at UBS, said the release of the much-anticipated memo from House Intelligence Committee Chairman Devin Nunes on the Russian Federation probe remained in the background as stocks sold off Friday. The fastest accelerating wage growth of the recovery, 2.9 percent, heightened the prospect of tighter monetary policy and a higher interest rate increase, analysts said. Higher bond yields also mean higher borrowing costs for corporations.

But investors sold off Friday on fears that a stronger-than-expected jobs report would spur the Federal Reserve to raise interest rates more than expected. "It is hard to argue against a March Fed rate hike now", said James Knightley, chief worldwide economist at ING Bank. "I think that would be problematic", he said.

All of the S&P 500 companies together are expected to show earnings of about $155 per share this year in aggregate, up about $9 since December 20, Thomson Reuters' estimates show.

The yield on 10-year Treasuries rose five basis points to 2.834 percent.

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The Dow Jones Industrial sank 2.5 per cent, 665 points, to 25,520.96, its worst drop in percentage terms since June 2016.

Bond prices fell after the government reported more job gains last month. The 10-year Treasury yield popped above 2.85 percent for the first time since January 2014.

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

That report showed that the economy added 200,000 jobs in January, and the unemployment rate was also reported to hold steady at 4.1 percent-the lowest since 2000. The 100-day moving average on the S&P 500 was at about 2,632 Friday.

Germany's 10-year yield rose five basis points to 0.77 percent, the highest in more than two years.

The stock market has been on a roll since Donald Trump's election to the presidency - and the president often tweets about the bull market - but media stocks have largely not participated in the run-up.

"It's the pace and it's also the fear of how high inflation might go, and how the Fed might react", said Ed Keon, portfolio manager at QMA.

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