(Reuters) - Wall Street extended losses on Friday after a round of weak earnings and on the back of robust payrolls data that sent the 10-year Treasury bond yield to its highest level in four years, vexing all three major U.S. stock indexes.
The Dow Jones industrial average was down 554 points or 2.12 percent, on track for its biggest fall since June 27 2016, an hour before the close. The S&P 500 was off 1.8 percent heading for its biggest fall since Sept. 9, 2016. The Nasdaq down almost 1.6 percent.
PETER COSTA, PRESIDENT, EMPIRE EXECUTIONS INC, NEW YORK, NEW YORK
“If you look at yields on a minute by minute basis the market does the opposite. It’s more a correlation to yields than anything else, that in combination with the strong jobs report. The potential for a rate hike in March is probably around 90 percent. I think they’re strongly looking at doing something very soon.”
“I think you’re looking at inflation pressure and we’re going to start seeing more of it. It has to do with wage inflation.”
MICHAEL O’ROURKE, CHIEF MARKET STRATEGIST, JONESTRADING, GREENWICH, CONNECTICUT
“The key thing is Treasury yields keep rising, and they hit a new high here this afternoon. They tried to pull back around 12:30 and when that didn’t work, they started rallying again,” .
“We had good economic in the jobs report this morning and that’s just another reason rates should be going up.”
“One of the key mantras of the bull market has been stocks are inexpensive relative to bonds, and bonds are getting cheaper, especially at these highs. So people are taking profits and they probably should be.”
KEITH LERNER, CHIEF MARKET STRATEGIST, SUNTRUST ADVISORY SERVICES, ATLANTA
“In the big picture, we had a great January. A huge amount of money came into the market. The sentiment was getting a little frothy, and we were developing some complacency in the market. Now that complacency is coming out of the market. The catalyst is the employment report. Also, right now, the market is recalibrating to a greater Treasury level than it’s used to.
“The Treasury yields are becoming more competitive with the stock market. Why yields are higher: it’s a better economy, there are good corporate profits, there’s more sales growth, more money to spend.”
DENNIS DICK, HEAD OF MARKETS STRUCTURE, BRIGHT TRADING LLC, VEGAS
“There’s a little bit of panic here today. It could be the start of something bigger.”
“We’ve seen a pattern develop in a lot of stocks, companies getting sold off on their earnings reports.”
“Everything is an excuse to take profits right now. Its money managers riding this wave for a long time take chips off the table.”
ART HOGAN, CHIEF MARKET STRATEGIST AT WUNDERLICH SECURITIES IN NEW YORK
“It’s Friday, once this heads in a direction nobody is going to get in the way. Unfortunately big numbers look much bigger when we haven’t seen them in a year. What is really interesting is down 500 points was the crash of 1987. That was 22 percent, so it’s hard to keep that in context.
TRACIE MCMILLION, HEAD OF GLOBAL ASSET ALLOCATION STRATEGY, WELLS FARGO INVESTMENT INSTITUTE, WINSTON-SALEM, NORTH CAROLINA
“We’ve had a really good year, but you can’t continue at this pace. It may sound a little clichéd, but the weakness here is very welcome. I’d be more concerned if we went day after day without any of kind of pullback. It’s good to see a little bit of caution come back into the market. But we don’t see anything that’s going to cause a significant bear market. If it’s a 3.5 percent smooth down week, we’d be buyers. I think it’s still a ‘buy the dips’ kind of market.”
CHUCK CARLSON, CHIEF EXECUTIVE OFFICER, HORIZON INVESTMENT SERVICES, HAMMOND, INDIANA
“You had some bellwether stocks (Apple and Alphabet) that maybe had earnings that were a little disappointing that could have given this a little bit of a negative tone.”
“My sense is people are starting to really get increasingly uncomfortable with the rapid rise in interest rates that we have seen and the uncertainty of how that is actually going to start to play out relative to competition for stocks. The 10-year has really escalated here pretty sharply in terms of the yield. You are getting closer to that 3 percent 10-year rate that a lot of people think is going to be a significant development for the market.”
“You have a jobs report today that was pretty robust all kind of feeding into the higher interest rates, greater inflation story, and I think the markets are trying to grapple with that right now.”
PETER KENNY, SENIOR MARKET STRATEGIST, GLOBAL MARKETS ADVISORY GROUP, NEW YORK
“That is definitely the touchstone — the fact that the 10-year yield has really moved so substantially higher in such a short period of time and that it is finally reflecting monetary policy. That there is a real link between the way markets are pricing interest rates and inflation and Fed monetary policy is a big deal because we really haven’t seen that in quite some time.
“Frankly it’s not a familiar feeling for investors because we haven’t had it in a while. The big pop in the yield on the 10-year, coupled with the data that came out of the Atlanta Fed which spoke to the potential of a first quarter GDP number in the 5.4 percent area, which was so far outside the bell curve in terms of investor expectation and our most recent fourth quarter data, it was a bit of a jolt to the markets.
BONDS: The 2- US2YT=RR Treasury note yield eased to 2.1534 percent, while the 10-year US10YT=RR bond yield rose to 2.8540 percent, the highest since January 23, 2014.
FOREX: The dollar index .DXY was up 0.6 percent
VIX: The Cboe volatility index hit its highest since Nov. 2016, and was last at 17.6
Americas Economics and Markets Desk; +1-646 223-6300