Global equities tumble as US jobs data spikes bond yield

NEW YORK, Feb 3, (Agencies): Stock markets plunged and bond yields soared on Friday after US data showing the strongest annual wage growth since 2009 rattled investors who fear accelerating inflation will usher in more interest rate hikes than expected this year.

Yields on the benchmark 10-year US Treasury note shot up to a fouryear high just minutes after the release of a Labor Department unemployment report for January that underscored strong momentum in the US economy.

A gain of 200,000 jobs last month and annualized increase in average hourly earnings to 2.9 percent led the dollar to surge against the yen, the euro and a basket of six currencies.

The price of the US 10-year note later fell further, pushing the yield up as high as 2.854 percent from 2.773 percent late on Thursday.

The rapid rise in the 10-year note — the world benchmark for corporate lending — sent shockwaves through a market grown accustomed to low inflation and a steady tick higher in stocks.

“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 New York. It was the biggest single-day percentage decline for the benchmark S&P 500 index since September 2016 and for the Dow since June 2016. The S&P 500 is still up 3.2 percent for the year.

A stock slide of at least 1 percent in Europe later accelerated on Wall Street as the strong labor market data boosted chances the Federal Reserve will raise rates four times this year instead of the three hikes analysts had expected.

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

The Dow Jones Industrial Average fell 665.75 points, or 2.54 percent, to 25,520.96. The S&P 500 lost 59.85 points, or 2.12 percent, to 2,762.13 and the Nasdaq Composite dropped 144.92 points, or 1.96 percent, to 7,240.95.

Disappointing results from some of the largest US companies also weighed on stocks. Oil majors Exxon and Chevron fell 5.1 percent and 5.6 percent, respectively, after reporting lower-than-expected quarterly profits.

Google-parent Alphabet fell 5.3 percent after an earnings miss and Apple fell 4.3 percent as investors focused on its muted forecast rather than strong iPhone prices.

MSCI’s all-country world index of equity performance in 47 countries fell 1.8 percent while its gauge of emerging market stocks lost 1.43 percent.

Deutsche Bank’s disappointing results pulled the heavyweight banking sector down to help European shares post their biggest weekly loss in more than a year, while Britain’s top share index sealed its weakest week in nine months on BT’s results.

The pan-European FTSEurofirst 300 index of leading regional shares closed down 1.37 percent and the blue-chip FTSE 100 index in London closed down 0.63 percent.

The dollar index, tracking the unit against a basket of major currencies, rose 0.59 percent, with the euro down 0.38 percent to $1.2460. The Japanese yen weakened 0.64 percent

versus the greenback at 110.12 per dollar.

US

All 11 major sectors of the S&P 500 closed down. Technology weighed the heaviest, with Microsoft pulling the sector down 3.0 percent.

The CBOE Volatility Index, the most widely followed barometer of expected near-term volatility for the S&P 500 Index rose more than four points to 17.86, its highest since November 2016. VIX options trading volume hit a record high.

Analysts now see fourth-quarter earnings growth of 13.6 percent for the S&P 500, up from 12 percent on January 1. Half of the index’s companies have reported, 78 percent of which beat Street expectations, according to Thomson Reuters data.

Exxon Mobil Corp and Chevron Corp shares were down 5.1 percent and 5.6 percent, respectively, after the oil companies posted lower-thanexpected fourth-quarter profit.

Amazon.com was a bright spot, up 2.9 percent as Wall Street analysts quickly upped their price targets following the online retailer’s impressive earnings report.

Declining issues outnumbered advancing ones on the NYSE by a 7.70-to-1 ratio; on Nasdaq, a 3.90-to1 ratio favored decliners.

The S&P 500 posted 18 new 52-week highs and 18 new lows; the Nasdaq Composite recorded 48 new highs and 103 new lows.

Volume on US exchanges was 5.39 billion shares, compared to the 7.33 billion average for the full session over the last 20 trading days.