CORRECTED - S&P 500, Dow on track for worst week in two years

The Dow fell 665 points, or 2.5 percent to 25,520 Friday, and the S&P 500 fell 2.1 percent to 2,762.

"The bond market sold off and the expectation is three maybe four rate hikes this year in light of the jobs report", said Nolte.

Stocks ended their worst week in two years Friday, and the Dow's drop was its biggest in percentage terms since June 2016.

The theory was that investments in stocks and bonds would make it easier for companies to raise money, invest and hire workers as the global economy healed.

Several giant USA companies dropped after reporting weak earnings, including Exxon Mobil and Alphabet.

The sharp decline in stocks this week short-circuited a robust start to the year that was spurred by strong global economic growth, solid company earnings and lingering enthusiasm for the GOP tax overhaul.

The downturn also follows a long period of unprecedented calm in the market. The 10-year Treasury yield jumped to as high as 2.85 per cent, a four-year high, putting pressure on the stocks.

Shares of oil majors Exxon and Chevron were down 5.8 per cent and 4.8 per cent, respectively, after reporting lower-than-expected quarterly profits.

The Standard & Poor's 500 index fell 45 points, or 1.6 percent, to 2,776 as of 2:45 p.m. The S&P 500 decreased 59.85 points, or 2.12 per cent, to 2,762.13, Xinhua news agency reported.

"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. This week yields hovered at their highest level since January 2014, fueled by the prospect of stronger economic growth in the USA and overseas.

Bond prices declined again Friday, sending yields higher. The yield on the 10-year Treasury note - a widely used gauge for overall interest rates - rose to more than 2.8 percent, the highest level since early 2014.

Interest rates recently have leapt sharply higher.

Those concerns were fueled by Friday reports on increasing wages and tightening labor markets, reflecting of a muscular economy that could veer out of control.

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"Rates are rising today specifically on the very good jobs numbers for January, and more importantly you have seen wage growth pop up to 2.9 percent year over year, which is a notable acceleration", said Jeffrey Schulze, an investment strategist at ClearBridge Investments.

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. Their goal was to incentivize investors to put their cash to work in the economy - such as by buying corporate stocks and bonds - rather than stashing it in the relative safety of government bonds.

"Sometimes we get something from out of the blue from other areas, but it really comes back to basic fundamentals of economics", Timmer said.

O'Hare said lacklustre earnings added to the selling momentum, with some of the biggest USA companies suffering dramatic declines after disappointing the market.

Google's parent company Alphabet slumped 5.3 per cent after the search giant reported results that missed analysts' forecasts. Shares in Exxon shed $4.54 to $84.53.

Technology companies also fell. The e-commerce giant rose 2.9 per cent after its fourth-quarter profit increased by more than $1 billion.

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

The Canadian dollar was trading 1 per cent lower at 80.65 USA cents.

USA crude fell $1.02 to $64.78 per barrel and Brent fell $1.34 to $68.31.

The March crude contract fell 35 cents to US$65.45 per barrel and the March natural gas contract slipped by a penny to roughly US$2.85 per mmBTU. In Asia, Japan's benchmark Nikkei 225 fell 0.9 percent and South Korea's Kospi slid 1.7 percent. Copper lost 2 cents to $3.19 a pound.

CURRENCIES: The dollar rose to 110.30 yen from 109.42 yen on Thursday. The euro weakened to $1.2451 from $1.2502.

Forecasts for earnings, one of the fundamental factors that drives stock prices, are rising fast as analysts factor in benefits from the US tax overhaul.

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