Stocks and bonds slid on Friday after record oil prices and surprisingly strong gains in jobs and wages unnerved investors, who feared that a more robust labor market and higher wages could spark inflation and lead to more interest rate hikes. The major indexes closed down for the week.
Wall Street extended its losses from Thursday after the US Labor Department said workers' average hourly earnings rose to US$16.13 last month, the largest increase for the year.
The financial markets got no help from the price of oil, which climbed on fears the US gasoline supply wouldn't meet the summer's demand. A barrel of light crude settled at a record US$62.31, up US$0.93, on the New York Mercantile Exchange.
The Dow Jones industrial average fell 52.07, or 0.49 percent, to 10,558.03, compounding an 87-point drop the previous session.
Broader stock indicators also closed lower. The Standard & Poor's 500 index dropped 9.44, or 0.76 percent, to 1,226.42, and the NASDAQ composite index fell 13.41, or 0.61 percent, to 2,177.91.
Bond prices sank. The yield on the 10-year Treasury note rose to 4.39 percent, its highest level since April, from a yield of 4.31 percent late Thursday.
"A nagging concern would be if bond yield continue to go higher," said Steven Goldman, chief market strategist, Weeden & Co in Greenwich, Connecticut, since rich bond yields make stocks less attractive.
"Assuming that does not occur, I think stocks can find support in the next week or two and start to stabilize," he said.
In other trading on Friday, the US dollar was up against the euro. Gold prices were lower.
The early part of the week saw a continuation of the market's rally last month, with the NASDAQ composite and S&P 500 indexes reaching four-year highs, but higher oil prices and data showing the economy growing at a strong clip ended the advance. Once it became clear that the earnings season that started early last month was going to end with strong corporate growth, investors began to look ahead gloomily to next week's Federal Reserve policy meeting.
The Fed's Open Market Committee, concerned about an overheating economy and inflation, is expected to raise the short-term federal funds rate a quarter percentage point on Tuesday; that would be the 10th rate hike since last June.
The three main indexes ended the week lower for the first time in five weeks. The Dow edged 0.78 percent lower, the S&P drooped 0.63 percent and the NASDAQ dropped 0.32 percent.
Investors have been longing for a sign that the Fed will stop its yearlong streak of interest-rate hikes, but an end to the hikes appears less likely after strong data on durable goods, the gross domestic product and Friday's jobs reports, said Joseph Battipaglia, chief investment officer at Ryan Beck & Co.
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