Dow Jones sees biggest drop since 2016

A trio of traders work in a booth on the floor of the New York Stock Exchange Tuesday Jan. 30

A trio of traders work in a booth on the floor of the New York Stock Exchange Tuesday Jan. 30

The S&P 500 and Dow averages capped their biggest weekly declines since 2016, with the Dow sinking 665 points today, spooked by the accelerating rise in bond yields.

A higher wage-related index in the jobs data released on Friday raised speculation that inflation will accelerate.

Even after the selloff this week, the S&P 500 is up 3.3% for this year and that is on top of a 19.4-percent gain for 2017. The yield on the USA 10-year Treasury hit a high of 2.8525 per cent yesterday.

For the week, the Dow fell 4%, while the Nasdaq and S&P 500 each slipped by more than 3%.

The Dow dropped almost 666 points, or 2.5 percent, just two weeks after it surpassed the 26,000-mark for the first time.

Ironically, Friday's selloff was sparked by continued good news in the job market, with the government reporting that the economy created 200,000 jobs in January, and data showing wages for US workers rose at their fastest pace since 2009 - a pick-up in pay that spurred fears of a spike in inflation.

European markets are lower at midday, as bank stocks sell off after Frankfurt-based Deutsche Bank posted a larger-than-forecast fourth-quarter loss - and its third straight full-year loss.

The decline comes amid worries about the impact of a tightening job market on the prospects for inflation and a surge in bond yields.

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The Dow ended down 666 points, or about 2.5%, Friday as Treasury yields gathered steam following an upbeat jobs report. A higher wage-related index in the jobs data released on Friday raised speculation that inflation will accelerate.

This has been a volatile week for US stocks. Some investors saw a potential buying opportunity. The decline Friday represents the sixth-biggest drop in iits 120-year history and the biggest daily drop in points since the end of 2008 during the depths of the recession.

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.

The decline sent the Dow below the psychologically important level of 26,000, which it had just broken through for the first time two-and-a-half weeks ago. On Wednesday the USA central bank said inflation was likely the rise over the course of the year. But at that time, the percentage plunge was 22.61%, while the current percentage selloff of 2.04%.

"For months I've been saying the market is underestimating what the Fed will do in raising interest rates", Jurrien Timmer, director of global macroeconomics for Fidelity Investments, told NBC News.

The numbers were a good sign for workers. The unemployment rate stood at 4.1 percent, unchanged from December. On Friday, 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.

President Trump, who repeatedly has touted the stock market's gains as evidence that his economic policy efforts are paying off, trumpeted the January jobs report on Twitter.

The Federal Reserve has already warned it is on the lookout for a sustained pick-up in inflationary pressures.

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