US close: Stocks plunge as interest rate rise fears take hold
US stocks closed sharply lower on Friday to end a gloomy week as a strong non-farm payrolls report added weight to rate hike expectations.
The Dow Jones Industrial Average fell 665 points, or 2.54% to finish at 25,520, while the S&P 500 was off 2.12% to 2,762 and the Nasdaq was down 1.96% to 7,240.
Stocks were hit by rising global bond yields and the downbeat tone in equity markets was only exacerbated after data revealed that US average hourly earnings surged in January as more jobs were added than expected, adding strength to the conviction that interest rates will be hiked three or even four more times this year.
The yield on the benchmark 10-year Treasury note was up 1.64% to 2.84%.
There were 200,000 new jobs added in the first month of 2018, the non-farm payrolls reported showed, which was better than the 180,000 forecast and the 160,000 added the month before. December payrolls were revised up to 160,000 from the initial growth indicated of 148,000, while November's growth was revised down to 216,000 from 252,000.
Unemployment was left unchanged at 4.1% for January, as expected, but average earnings grew 2.9% year-on-year versus the 2.6% Wall Street estimate and up from the 2.5% a month earlier. Month-on-month earnings were up 0.3%, in line with forecasts and following an upwardly-revised 0.4% gain for the previous month.
Pantheon Macroeconomics said: “In short, the labour market is tight, getting tighter, and employees are becoming more expensive."
"The question for the Fed now is whether the plan for ‘gradual’ tightening will be enough if wage gains accelerate further. If much further/faster rates hikes are to be avoided, with unpleasant consequences for asset prices, we have to see both productivity growth and labour participation rise markedly, and soon. It isn't happening yet. We still look for four hikes this year."
Minneapolis Federal Reserve President Neel Kashkari told CNBCthat the January jobs report was "one of the first signs" of wage growth.
"The most important thing that I saw in a quick review of the jobs data is wage growth," he said.
"We've been waiting for wage growth. Everyone's been declaring we're at maximum employment. More Americans have been coming in, which is a really good thing. But there hasn't been much wage growth. This is one of the first signs that we're seeing wage growth finally starting to pick up."
In corporate news, Amazon surged after it said late on Thursday that full-year revenue rose 31% to $178bn, while profit rose to $3bn from $2.4bn the year before.
Technology giant Apple was on the back foot early, but closed higher, after its results for the three months to the end of December released late on Thursday fell short of analysts’ expectations for iPhone sales.
Google parent Alphabet was sharply lower after its quarterly earnings were hit by rising costs.
Exxon shares fell sharply after the company's fourth quarter results missed estimates. The oil giant reported earnings of 88 cents a share on revenue of $66.5bn against estimates of adjusted earnings of $1.03 on revenue of $71.9bn.
Sector peer Chevron led the fallers as its final quarter earnings were also well below market expectations.
Barbie doll maker Mattel provided a rare bright spot amid the selling carnage. The toy company shares were down 8% ahead of the bell after reporting sales and earnings over the critical Christmas period had missed expectations before bouncing back to be 7.91% higher at the close.
Dow Jones - Risers
Pfizer Inc. (PFE) $36.54 -0.79%
3M Co. (MMM) $245.05 -1.17%
Travelers Company Inc. (TRV) $147.87 -1.41%
Unitedhealth Group Inc. (UNH) $231.77 -1.47%
McDonald's Corp. (MCD) $169.26 -1.54%
Coca-Cola Co. (KO) $46.69 -1.60%
Walt Disney Co. (DIS) $108.70 -1.62%
Nike Inc. (NKE) $67.09 -1.66%
Johnson & Johnson (JNJ) $137.60 -1.73%
Cisco Systems Inc. (CSCO) $40.93 -1.85%
Dow Jones - Fallers
Chevron Corp. (CVX) $118.58 -5.57%
Goldman Sachs Group Inc. (GS) $260.04 -4.48%
Apple Inc. (AAPL) $160.50 -4.34%
Visa Inc. (V) $120.94 -3.87%
Dowdupont Inc. (DWDP) $70.89 -3.55%
Exxon Mobil Corp. (XOM) $84.39 -3.33%
American Express Co. (AXP) $96.68 -3.32%
Intel Corp. (INTC) $46.15 -3.15%
Home Depot Inc. (HD) $193.97 -2.97%
Caterpillar Inc. (CAT) $157.49 -2.93%
S&P 500 - Risers
Mattel Inc. (MAT) $16.53 7.90%
Motorola Solutions Inc (MSI) $104.14 5.08%
XL Group Ltd (XL) $38.25 3.84%
Edwards Lifesciences Corp. (EW) $131.83 3.82%
Amazon.Com Inc. (AMZN) $1,429.95 2.87%
Newell Brands Inc (NWL) $27.98 2.12%
Roper Technologies Inc (ROP) $285.54 1.76%
HCP Inc. (HCP) $23.86 1.23%
Bristol-Myers Squibb (BMY) $63.48 1.08%
Westrock Company (WRK) $67.25 0.92%
S&P 500 - Fallers
Freeport-McMoRan Inc (FCX) $17.97 -7.61%
United States Steel Corp. (X) $34.58 -7.56%
Xerox Corp. (XRX) $31.63 -7.31%
Diamond Offshore Drilling Inc. (DO) $16.82 -6.71%
Clorox Co. (CLX) $130.93 -6.71%
Alcoa Corporation (AA) $49.08 -6.35%
Transocean Ltd. (RIG) $10.32 -6.31%
Murphy Oil Corp. (MUR) $29.48 -6.26%
CBS Corp. (CBS) $55.40 -5.99%
Discovery Communications Inc. Class A (DISCA) $23.81 -5.81%
Nasdaq 100 - Risers
Charter Communications Inc. (CHTR) $387.50 4.40%
Liberty Global plc Series A (LBTYA) $38.49 3.50%
Amazon.Com Inc. (AMZN) $1,429.95 2.87%
Liberty Interactive Corporation - Series A Liberty Ventures (LVNTA) $60.27 2.76%
Liberty Global plc Series C (LBTYK) $36.70 2.66%
Netflix Inc. (NFLX) $267.43 0.89%
Amgen Inc. (AMGN) $187.01 0.78%
Vodafone Group Plc ADS (VOD) $31.05 0.78%
Align Technology Inc. (ALGN) $257.38 0.71%
Regeneron Pharmaceuticals Inc. (REGN) $347.86 0.60%
Nasdaq 100 - Fallers
Lam Research Corp. (LRCX) $179.06 -5.31%
Alphabet Inc. Class A (GOOGL) $1,119.20 -5.28%
Seagate Technology Plc (STX) $51.77 -4.90%
Applied Materials Inc. (AMAT) $50.68 -4.88%
Alphabet Inc. Class C (GOOG) $1,111.90 -4.78%
Dollar Tree Inc (DLTR) $108.83 -4.43%
Illumina Inc. (ILMN) $220.18 -4.39%
Apple Inc. (AAPL) $160.50 -4.34%
Marriott International - Class A (MAR) $141.17 -4.30%
Incyte Corp. (INCY) $85.92 -4.18%