A robust US jobs report raised concern in markets that the Federal Reserve may raise interest rates sooner than previously thought, hammering U.S. stock and bond prices on Friday.
News the US unemployment rate hit a 6-1/2-year low in February fed into the dollar’s winning streak, propelling it to a fresh 11-1/2-year peak against a group of currencies and a similar high against the euro.
The greenback’s gains hurt oil and gold, whose prices are set against the US currency.
“Any sign of undue strength will raise the spectre of rates climbing sooner than expected, and we were already expecting rates to rise this year,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio.
Wall Street stocks and US Treasuries have scored strong gains in large part due to the Fed’s ultra-loose monetary policy to combat the recent recession and global credit crisis.
The US Labour Department said employers added 295,000 workers in February, beating a forecast of 240,000. It was the longest run of 200,000-plus increases since 1994. The jobless rate dropped to 5.5 percent from 5.7 percent in January.
US interest rates futures suggested traders had placed more bets the Fed might raise rates this summer, but they have not fully priced in such a move until late 2015.
In early afternoon trading, the Dow Jones industrial average was down 242.17 points, or 1.34 percent, to 17,893.55, the S&P 500 was off 24.3 points, or 1.16 percent, to 2,076.74 and the Nasdaq Composite had dropped 44.65 points, or 0.9 percent, to 4,938.16.
S&P Dow Jones Indices said Apple, the largest US firm by market value, will replace AT&T in its Dow index on March 18.
Europe’s benchmark FTSEurofirst 300 closed up 0.1 percent after touching seven-year highs ahead of the European Central Bank’s bond-purchase stimulus that begins on Monday.
Tokyo’s Nikkei stock index rose 1.2 percent, ending higher for four consecutive weeks.
The MSCI world equity index , which tracks shares in 45 nations, shed nearly 1.1 percent, to 425.03.
Worries about a Fed rate hike spurred selling in U.S. Treasuries, with benchmark 10-year note yields jumping to 2.24 percent, the highest since late December.
Italian, Spanish and Portuguese government bond yields posted record lows in anticipation of the ECB’s bond purchases.
The dollar index was last up 1.35 percent at 97.684.
The euro hit another 11-1/2-year low against the greenback and was last down 1.6 percent at USD 1.0853. The dollar was up 0.7 percent at 120.97 yen after touching its highest in about three months.
Brent crude was last down 77 cents, or 1.27 percent, at USD 59.71 a barrel. US crude was down USD 1.37, or 2.7 percent, at USD 49.38.
Spot gold fell USD 32.59 or 2.72 percent, to USD 1,165.61 an ounce.