Dow drops 300 points, Nasdaq falls 2% after unemployment falls, Treasury rates pop

Stocks fell sharply on Friday after the release of mixed employment data jolted interest rates higher.

The Dow Jones Industrial Average declined 300 points as Intel and Caterpillar lagged. The S&P 500 traded 1 percent lower as the tech sector underperformed. The Nasdaq Composite pulled back 2 percent as Amazon, Apple, Netflix and Alphabet all traded lower.

The U.S. economy added 134,000 in September, well below the expected gain of 185,000. However, the U.S. unemployment rate fell to its lowest level since 1969. Job gains for August also received a sharp upward revision to an addition of 270,000 jobs from 201,000. Wages, meanwhile, grew by 2.8 percent last month on a year-over-year basis to match expectations.

“The labor market is going to keep getting tighter and that will mean higher wages,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “This is going to keep upward pressure on rates and continue to put downward pressure on stocks.”

The 10-year note yield rose to 3.24 percent and hit a fresh 2011 high while the two-year note yield advanced to 2.897 percent.

The Cboe Volatility Index (VIX), widely considered the best fear gauge in the market, hit a high of 16.85, its highest level since Aug. 15.

The rise in yields pushed home-builder stocks lower. The SPDR S&P Homebuilders ETF (XHB) fell more than 1.5 percent and was on pace to post a 13-day losing streak.

Yields have been on the rise this week amid strong economic data. The U.S. services sector grew at its fastest rate on record last month, according to data released by the Institute for Supply Management.

Comments from Federal Reserve Chair Jerome Powell also pushed yields higher. Powell on Wednesday said that the Fed had a long way to go before interest rates would hit neutral, suggesting to markets that more hikes could be coming.

“There is clear reason why this is happening,” said Paula Solanes, senior portfolio manager at SVB Asset Management. “All of this goes very well with what the Fed is doing and what Fed Chair Powell said this week.”

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