Dow industrials drop 600 points, extending a weeklong slump

Traders work on the floor of the NYSE in New York

At 2.13 pm ET, the Dow Jones Industrial Average fell 472.36 points, or 1.8 percent, to 25,714.35, the S&P 500 lost 42.99 points, or 1.52 percent, to 2,778.99 and the Nasdaq Composite dropped 97.17 points, or 1.32 percent, to 7,288.70. The S&P 500 decreased 59.85 points, or 2.12 per cent, to 2,762.13, Xinhua news agency reported.

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

That caused the 10-year Treasury yield to surge to 2.8450 percent the highest since January 2014, which could make returns on Treasuries look more attractive relative to stocks.

The optimism helped lift stock markets ever higher, extending the boom into its ninth year. Stocks haven't had a pullback of 10 per cent or more in two years, and hit their latest record highs just one week ago.

The S&P 500 stocks had been trading at an average of between 18 and 20 times the forecasts of their underlying corporate earnings for the next 12 months, which was above their historical average of 15.5 but well below the price-earnings ratios seen in prior stock market bubbles that later collapsed.

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 USA workers rose at their fastest pace since 2009 - a pick-up in pay that spurred fears of a spike in inflation.

United States stocks slumped on Friday, with the market suffering its worst week in two years as fears of inflation and disappointing quarterly results from technology and energy giants spooked investors.

Analysts have been eyeing a recent increase in USA bond yields that accelerated further on Friday following the jobs data.

This has been a volatile week for USA stocks.

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"The market is becoming more vigilant about these concerns, and that's good and healthy".

The Fed also expected US inflation on a 12-month basis to "move up this year and to stabilize" around the central bank's 2 percent target over the medium term.

Fears about inflation were stoked by the stronger-than-anticipated jobs report for January, which came out Friday morning.

Traders and financial professionals work on the floor of the New York Stock Exchange ahead of the opening bell, February 2.

Nonfarm payrolls jumped by 200,000 jobs last month after rising 160,000 in December, the Labor Department said on Friday.

Interest rates that are set every day in the global bond markets are already leaping higher, in anticipation of central bank rate increases later this year.

The Standard & Poor's 500 index gave up 30 points, or 1.1 percent, to 2,791.

That helped the yield on 10-year Treasuries surge to 2.845% which is the highest it has been since January of 2014, which means that Treasuries returns could become more attractive than stocks.

The Labor Department said Friday 200,000 jobs were added to the economy in January and the jobless rate held steady 4.1 percent, the lowest rate in almost 20 years.

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