Stocks fell sharply in morning trading Friday, putting the market on track for its worst week in two years, as several large companies sank after reporting weak earnings. Exxon Mobil, Chevron and Google’s parent company, Alphabet, all dropped. Bond yields shot higher after the government reported another month of strong job gains, further stoking fears of inflation and worries that higher interest rates could weigh on companies and stock prices. Crude-oil prices headed lower.
KEEPING SCORE: The Standard & Poor’s 500 index fell 23 points, or 0.8 percent, to 2,798 as of 11:08 a.m. Eastern Time. The benchmark index is down 2.7 percent since hitting a record high a week ago. The Dow Jones Industrial Average lost 281 points, or 1.1 percent, to 25,905. The Nasdaq slid 54 points, or 0.7 percent, to 7,331. The Russell 2000 index of smaller-company stocks gave up 16 points, or 1 percent, to 1,563.
THE QUOTE: “We’ve enjoyed low interest rates for so long, we’re having to deal with a little bit higher rates now, so the market is trying to figure out what that could mean for inflation,” said Darrell Cronk, head of the Wells Fargo Investment Institute. “The concern for the stock market is as interest rates go up so does the cost of debt service, the discount rate that you would use in factoring earnings growth for companies.”
JOBS DATA: U.S. employers added a robust 200,000 jobs in January, slightly above market expectations for a 185,000 increase. Meanwhile wages rose at the fastest pace in more than eight years, suggesting employers are competing more fiercely for workers. The figures point to an economy on strong footing even in its ninth year of expansion, fueled by global economic growth and healthy consumer spending at home.
FED IMPLICATIONS: The pickup in hourly wages, along with a recent uptick in inflation, may make it more likely the Federal Reserve will raise short-term interest rates more quickly in the coming months.
BOND YIELDS: Bond prices declined again Friday, sending yields higher. The yield on the 10-year Treasury rose to 2.84 percent from 2.79 percent late Thursday. European bond yields also rose after the U.S. jobs report came out.
The yield on the 10-year Treasury note, the benchmark for many kinds of loans including mortgages, has risen swiftly in recent months, having traded as low as 2.17 percent in September. The yield is now the highest it’s been since January 2014. The increase has been driven by the prospect of stronger economic growth, and higher inflation, in the U.S. and abroad.
Investors are worried that higher interest rates could weigh on company earnings and stock prices, by making bonds more appealing than stocks and by making it more expensive for companies to borrow money.
SEARCHING FOR ANSWERS: Google’s parent company Alphabet slumped 5 percent after the search giant reported results that missed analysts’ forecasts. The stock slid $58.92 to $1,112.67.
FALLING SHORT: Exxon Mobil dropped 5.7 percent and Chevron lost 3.9 percent, after the oil companies’ latest quarterly results fell short of forecasts. Shares in Exxon shed $5.05 to $84.02. Chevron gave up $4.85 to $120.72.
X FACTOR: Apple declined 2.5 percent after the technology company said it sold 77.3 million iPhones in the last quarter, below the 80 million analysts had expected. The stock was down $4.17 to $163.61.
AMAZIN’ BOOST: Amazon climbed 5.5 percent after its fourth-quarter profit increased by more than $1 billion. The online retail giant said it sold more voice-activated gadgets, enlisted new Prime members and benefited from its recent purchase of Whole Foods. Amazon shares gained $77 to $1,467.
ENERGY: Oil futures declined. Benchmark U.S. crude slid $1.12, or 1.7 percent, to $64.68 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, fell $1.62, or 2.3 percent, to $68.03 per barrel in London.
CURRENCIES: The dollar rose to 110.40 yen from 109.42 yen on Thursday. The euro weakened to $1.2440 from $1.2502.
BITCOIN: The price of bitcoin was down 0.5 percent to $9,006, according to the tracking site CoinDesk. Bitcoin futures on the Cboe Futures Exchange slid 0.6 percent to $9,030.
MARKETS OVERSEAS: Major stock indexes in Europe declined. Germany’s DAX slid 1.4 percent, while France’s CAC 40 lost 1.3 percent. The FTSE 100 index of leading British shares gave up 0.4 percent. In Asia, Japan’s benchmark Nikkei 225 fell 0.9 percent and South Korea’s Kospi slid 1.7 percent. Hong Kong’s Hang Seng index dipped 0.1 percent.