Published: Sun, February 04, 2018
Money | By Wilma Wheeler

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

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

After the data, benchmark 10-year Treasury yields extended their rise to more than 2.8 percent, while traders boosted bets that the U.S. Federal Reserve will raise interest rates three times this year.

Selling pressure accelerated through Friday's session after the Labor Department reported an increase of 200,000 in non-farm payrolls and 0.3% gain in average hourly earnings.

There was nowhere to hide on the stock market, with all 11 S&P 500 sectors lower.

"It feels as though the grand era of interest rates below 3 percent will soon be in the rear-view mirror", said Mike Terwilliger, portfolio manager of Resource Liquid Alternatives for the Resource Credit Income Fund in NY. But the stock sell-off was long overdue, he said.

"We think fundamentals are very strong", said Alicia Levine, head of global investment strategy at BNY Mellon Investment Management.

Stock strategists Friday said the stock market would not stop shaking out until bond yields stop rising.

"Next week we will start sorting and saying, 'Wait a minute".

The S&P 500 Index fell 1.8 percent at 2:28 NY.

"What is good for the average American worker ends up being negative for stocks because it increases the odds of further rate hikes", Michael Antonelli, managing director of institutional sales trading at Robert W. Baird in Milwaukee.

Major stock indexes dropped sharply Friday, with the Dow Jones industrial average tumbling more than 550 points amid signs that wage growth is finally picking up. Nevertheless, the Dow shed more than 650 points - as Apple (AAPL) entered correction territory - marking the biggest one-day percentage loss since Brexit.

Disappointing results from some of the largest US companies also weighed on stocks.

Exxon Mobil Corp and Chevron Corp shares were down 5.6 per cent and 4.2 per cent, respectively, after the oil companies posted lower-than-expected fourth-quarter profit.

Google-parent Alphabet fell 5.2 percent after its profit also misses analysts' estimates.

MSCI's all-country world index.MIWD00000PUS of equity performance in 47 countries fell 1.8 percent while its gauge of emerging market stocks.MSCIEF lost 1.43 percent. Bloomberg's dollar index surged to erase a weekly loss.

The pan-European FTSEurofirst 300 index of leading regional shares lost 0.98pc and the STOXX 600 index tumbled 1.07pc.

However, nonfarm productivity fell 0.1 percent in the fourth quarter, which was the first drop since the first quarter of 2016, while unit labor costs rose 2.0 percent in the final three months of 2017. Japan's Nikkei ended down 0.8% as the yen strengthened against the dollar. The rise in the VIX implies that volatility in otherwise subdued markets is beginning to make a comeback. Now, he's concerned the 10-year could reach an even higher level. Crude oil prices headed lower. The deep decline in Brent cut the gap between it and WTI to its narrowest since August. March-dated crude futures were down 35 cents, or 0.5%, at $65.45 per barrel by the close.

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