Dow Futures Tumble 225 Points, Bond Yields Spike on Jobs Surprise

Dow Futures Tumble 225 Points, Bond Yields Spike on Jobs Surprise

The Toronto Stock Exchange'sS&P/TSX composite index unofficially closed down 254.89 points, or 1.61 percent, at 15,606.03, its biggest drop since May.

The Standard & Poor's 500-stock index fell 2.1 per cent, also ending its worst week in two years.

The plunge in stocks came after U.S. payrolls data showed a jump in wage inflation. The 3 percent yield is looked at as a key threshold that can drive investors out of equities and into bonds.

This prompted the 10-year Treasury yield to surge to a 4-year high, raising concerns that higher yields may adversely affect businesses.

But market players are not convinced that the bull market in stocks that that saw the S&P 500 rise 5.6 percent in January is over.

On Friday, stocks tumbled by more than 2 percent, propelling the market to its worst week in two years.

Analysts have been eyeing an increase in U.S. bond yields that accelerated further on Friday after a stronger-than-expected United States jobs report raised expectations more Federal Reserve interest rate increases could be coming.

Technology, banks and energy stocks accounted for much of the broad slide.

While some pundits questioned whether the incendiary memo was dousing the stock market blaze, experts said the market downswing was all about the numbers.

LeBron James speaks out about Warriors report: 'It's nonsense'
Unless we're competing against them the next night or you want to ask me about a highlight from the night before. Having said all of that, re-signing with the Cleveland Cavaliers is not out of question.

Friday's significant market dent comes after a week-long downwards spiral.

More recently, the market had been surging in the so-called 'Trump rally'. On Wednesday the USA central bank said inflation was likely the rise over the course of the year.

Equally important, hourly wages rose 0.3% from the prior month to US$26.74, putting worker pay up 2.9% compared to January of previous year, the largest 12-month gain since June 2009.

The down day came after the government reported that US job growth surged in January and wages increased further, recording their largest annual gain in more than 8-1/2 years, bolstering expectations that inflation will push higher this year as the labor market hits full employment.

That is unnerving for investors accustomed to the last decade's rock-bottom interest rates. The rate was at 2.41 per cent four weeks ago and 2.66 per cent on Monday.

Bond prices fell after the government reported more job gains last month.

The Labor Department said Friday 200,000 jobs were added to the economy in January and the jobless rate held steady 4.1 percent, the lowest rate in almost 20 years.

"All that feeds into the narrative and fuels the flames about inflation picking up", which could lead the Federal Reserve to further lift short-term interest rates to keep inflation in check, O'Hare said.

On the earnings front, of the S&P 500 companies that have reported as of Friday morning, 78 percent have beaten bottom-line expectations, while 80 percent have surpassed sales estimates, according to Thomson Reuters. After the data, benchmark 10-year Treasury yields extended their rise to more than 2.8 per cent, as traders boosted bets that the Fed will raise interest rates.

Related Articles