NEW YORK: Worries about the impact of a tightening job market on the prospects for inflation and a surge in bond yields have sent investors fleeing equities with the Dow Jones Industrials Average swooning almost 666 points, for its biggest daily percentage loss in 20 months.
It was the biggest daily point fall in the Dow since December 2008 during the financial crisis.
With Friday’s rout, Wall Street’s three major indexes logged their biggest weekly losses in two years, after closing at record highs the previous week. The S&P 500 and Dow saw their worst weeks since early January 2016 while Nasdaq had its worst week since early February 2016.
Stock price losses accelerated after the US Labor Department reported employment grew more than expected in January with the biggest wage gain in more than 8-1/2 years. The picture of workers commanding higher salaries fuelled expectations that inflation is on the rise, which could prompt the Federal Reserve to take a more aggressive approach to rate hikes this year.
That caused the 10-year Treasury yield to surge to 2.8450 per cent the highest since January 2014, which could make returns on Treasuries look more attractive relative to stocks.
But market players are not convinced that the bull market in stocks that that saw the S&P 500 rise 5.6 per cent in January is over. In fact many say a pull back was overdue.
The Dow Jones Industrial Average fell 2.54 per cent, to 25,520.96, the S&P 500 lost 2.12 per cent, to 2,762.13 and the Nasdaq Composite dropped 1.96 per cent, to 7,240.95.
LONDON: Stocks in Europe plunged on US data showing the strongest annual wage growth since 2009, as the strong labour market report boosts the chances the Federal Reserve will raise rates four times this year instead of the three hikes analysts had expected.
