US stocks fell sharply Friday, with the Dow Jones industrial average experiencing its worst weekly percentage drop in two years.
For instance, the benchmark Standard & Poor's 500 index jumped an eye-popping 7.5 percent in January alone. The tech selloff worsened, sending the Nasdaq 100 Index lower by 2.1 percent.
This resulted in a rise in interest rates and a drop in stock prices this week. The unemployment rate stood at 4.1 percent, unchanged from December. And investors anxious it could prompt the Federal Reserve to raise interest rates faster than expected.
The Dow lost 508 points by 2:30 p.m. Friday after three days of consecutive losses to start the week. The yield on the 10-year Treasury rose to 2.84 percent from 2.79 percent late Thursday. Higher interest rates for debt can spur investors to pull money out of the stock market to put into bonds.
The U.S. bond market's gauges of inflation expectations added to their earlier rise on Friday as domestic wages recorded their strongest annual increase in more than 8-1/2 years, suggesting inflation may be accelerating. The one-month ratio of upward to downward revisions was the highest since at least 1986, as far back as the bank's data goes.
Even stock market bulls have long said that a pause - or even a dip - would help prevent the market from overheating.
In the meantime, mixed corporate earnings reports also weighed on the major indices.
In addition to the tax law, USA companies' earnings are benefiting from improving global economic growth and the weaker US dollar, which helps USA multinationals exports sales, said Jill Carey Hall, equity and quant strategist at Bank of America-Merrill Lynch. Shares in Exxon shed $5.05 to $84.02. Apple also reported lighter-than-expected iPhone sales for its previous quarter.
Alphabet fell 5.3 percent after the Google parent's fourth-quarter profit came in below consensus on increased spending.
The plunge represents the largest daily percentage drop for the index since June 2016 - soon after voters in the United Kingdom chose to leave the European Union. Amazon shares gained $77 to $1,467.
"Wage growth has surged to a cycle high and jobs growth remains strong". The S&P 500 has lost 3.9 per cent since hitting a record high a week ago. "Consequently, it will need a big shock to prevent the Fed from hiking in March", ING said.
Aphria's losses came the same day it announced a $20-million deal to sell its stake in an Arizona cannabis company to an affiliated USA firm.
There was nowhere to hide on the stock market, with all 11 S&P 500 sectors lower.
Despite the warning signals flashing for global stock markets, economists said the drop in equity prices may be a short-term trend if the world economy can continue to expand without generating too much inflation and if central banks do not hike interest rates more than anticipated.