U.S. stocks slumped Friday, pulling down the Dow Jones industrial average by more than 600 points and placing the market on track for its worst week in two years.
Technology and energy stocks accounted for much of the broad slide as several major companies, including Exxon Mobil and Google's parent company, Alphabet, sank after reporting weak earnings.
Investors have grown increasingly worried that a rapid rise in interest rates, spurred by higher inflation, could derail the market's strong and calm ride upward. And they're concerned the Federal Reserve will respond to higher inflation by raising interest rates more quickly than expected.
The yield on the 10-year Treasury note, a benchmark for many kinds of loans, including mortgages, climbed to 2.85 percent Friday, the highest level in roughly four years. The rate was at 2.41 percent four weeks ago and 2.66 percent on Monday.
The prospect of higher interest rates, which can weigh on company earnings and stock prices, derailed the market's strong start to 2018, pulling the indexes lower for much of this week.
"We've enjoyed low interest rates for so long, we're having to deal with a little bit higher rates now, so the market is trying to figure out what that could mean for inflation," said Darrell Cronk, head of the Wells Fargo Investment Institute. "The concern for the stock market is as interest rates go up so does the cost of debt service, the discount rate that you would use in factoring earnings growth for companies."
The Standard & Poor's 500 index fell 58 points, or 2.1 percent, to 2,763 as of 3:07 p.m. Eastern Time. That's the biggest loss for the benchmark index since September 2016. The S&P 500 has lost 3.8 percent since hitting a record high a week ago.
The Dow Jones industrial average lost 633 points, or 2.4 percent, to 25,563. The Nasdaq slid 136 points, or 1.9 percent, to 7,246. The Russell 2000 index of smaller-company stocks gave up 32 points, or 2.1 percent, to 1,547.
This week's market pullback has come even as U.S. economic data continues to reflect strong growth.
U.S. employers added a robust 200,000 jobs in January, slightly above market expectations for a 185,000 increase. Meanwhile wages rose at the fastest pace in more than eight years, suggesting employers are competing more fiercely for workers. The figures point to an economy on strong footing even in its ninth year of expansion, fueled by global economic growth and healthy consumer spending at home.
The pickup in hourly wages, along with a recent uptick in inflation, may make it more likely the Fed will raise short-term interest rates more quickly in the coming months. Some economists were predicting Friday that the central bank will raise its benchmark rate four times this year, rather than the three times most previously expected.
"With financial conditions continuing to ease and core price inflation also starting to pick up, we expect this will persuade the Fed to hike rates four times this year," Andrew Hunter, an economist with Capital Economics, wrote in a published note Friday.
Bond prices declined again Friday, sending yields higher. The yield on the 10-year Treasury rose to 2.85 percent from 2.79 percent late Thursday. European bond yields also rose after the U.S. jobs report came out.
The yield on 10-year Treasury note, the benchmark for many kinds of loans including mortgages, has risen swiftly in recent months, having traded as low as 2.17 percent in September. The yield is now the highest it's been since January 2014. The increase has been driven by the prospect of stronger economic growth, and higher inflation, in the U.S. and abroad.
This week's sell-off comes as more money has been going into stock funds. In the three weeks through Jan. 24, investors have pushed a net $18.3 billion into U.S. stock funds this year, according to estimates from the Investment Company Institute.
Traders continued to sift through a raft of corporate earnings reports Friday.
Roughly halfway through this earnings reporting season, some 78 percent of companies have turned in profits above analysts' expectations. Revenues have also been stronger than expected, an indication that the improving global economy is translating into better sales. Altogether, 64 percent of reporting S&P 500 companies have beaten expectations for both revenue and earnings, according S&P Global Market Intelligence. That's up from 54 percent a quarter earlier.
While earnings overall have been strong, some big companies have posted disappointing results.
Google's parent company Alphabet slumped 4.9 percent after the search giant reported results that missed analysts' forecasts. The stock slid $58.33 to $1,123.26.
Exxon Mobil dropped 5.8 percent, while Chevron lost 4.2 percent after the oil companies' latest quarterly results fell short of forecasts. Shares in Exxon shed $5.19 to $83.88. Chevron gave up $5.22 to $120.35.
Apple declined 3.4 percent after the technology company said it sold 77.3 million iPhones in the last quarter, below the 80 million analysts expected. The stock was down $5.63 to $162.15.
Amazon climbed 4.5 percent after its fourth-quarter profit increased by more than $1 billion. The online retail giant said it sold more voice-activated gadgets, enlisted new Prime members and benefited from its recent purchase of Whole Foods. Amazon shares gained $62 to $1,452.
Oil futures declined. Benchmark U.S. crude slid 35 cents, or 0.5 percent, to settle at $65.45 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, fell $1.07, or 1.5 percent, to $68.58 a barrel in London.