The Dow Jones Industrial Average tumbled more than 500 points in the biggest plunge since Donald Trump’s election, as a rout in the bond market spilled into equities.
Strong jobs data that increased the likelihood the Federal Reserve will lift rates next month sent bond bulls scurrying and rattled equity investors who haven’t seen a week this bad in two years. The S&P 500 Index’s five-day rout topped 3 percent—marking its first pullback of at least that much in a record 404 days.
The 10-year Treasury yield popped above 2.85 percent for the first time since January 2014.
There was nowhere to hide on the stock market. Energy shares sank 4 percent as earnings disappointed and crude slumped. The tech selloff worsened, sending the Nasdaq 100 Index lower by 1.5 percent. It’s on track for the worst week since February 2006.
Indiana stocks got caught in the downdraft. Mall operator Simon Property Group slipped $3.22, or 2 percent, to $156.43. Health insurer Anthem Inc.dropped $3.24, or 1.4 percent, to $240.19, and Eli Lilly and Co. lost 86 cents, or 1 percent, to $81.55.
Not even a record rally at Amazon.com Inc. could rescue the measure, as the world’s biggest company, Apple Inc. hit its lowest since October.
“People are finally starting to reprice reflation; it’s about time,” Jeanne Asseraf-Bitton, head of global cross-asset research at Lyxor Asset Management, said by phone.
“Global economic growth is strong and corporate earnings are very solid, so there’s no reason to question the equity bull market. The rise in bond yields is good. It's just the speed at which it’s happening that is making investors nervous. Bottom line: this is a healthy correction.”
U.S. hiring picked up in January and wages rose at the fastest annual pace since the recession ended, as the economy’s steady move toward full employment extended into 2018.
Equities are being tested by the surge in bond yields, with some fund managers saying 3 percent U.S. 10-year rates would signal a bond bear market.
The level is seen by many stock-watchers as a potential trigger for a correction in equities. In Europe, a bond selloff deepened across the continent, and equities dropped for a fifth straight day, the longest streak since November.
Disappointing results from companies including Deutsche Bank AG and BT Group Plc. paced losses, with Germany’s DAX giving up the year’s gains, capping the worst weekly decline since 2016.
Bund yields reached a fresh two-year high, while the euro and British pound weakened. Japanese debt gained and the yen declined after the Bank of Japan intervened to stem the rise in rates.
Elsewhere, oil edged lower, though still trading near its highest level since 2015 in New York. Bitcoin continued to slide after a miserable January, falling below $8,000.