The stock market is having a roller-coaster week.
The Dow dropped more than 200 points on Friday morning. Investors weren’t put in a better mood by strong wage growth revealed in the latest jobs report. It only reinforced concern about inflation and the bond market.
The dip put the Dow back below 26,000. Both the Dow and S&P 500 are on track for their worst week in two years — down more than 2% each.
“We’ve got a smorgasbord of negativity this morning,” said Ken Odeluga, market analyst with City Index in London. “It’s been pretty nervous all week.”
The Dow fell 540 points over the first two days of the week. It rebounded 261 points at the open Wednesday, then gave up much of those gains by the end of the day.
The turbulence stands in stark contrast to the unusual calm that had settled over Wall Street for months. The VIX, a measure of market volatility, has soared 30% this week.
January’s jobs report didn’t settle the market down. The economy added 200,000 jobs in January, and wages grew at the fastest pace in eight years. That’s great news for workers who have been stuck with anemic pay increases.
But if wages grow too fast, they could eat into Corporate America’s record profit margins.
The other concern: Wage growth could be a sign that inflation, which has been mysteriously low for years, may heat up. That would force the Federal Reserve to raise interest rates faster than investors may be comfortable with.
Those concerns are showing up in the bond market. The 10-year Treasury yield reached a four-year high of 2.84% on Friday. It was at about 2.4% at the start of the year.
Some investors are worried they could climb high enough to slow the economy by raising borrowing costs. They also worry that higher returns on bonds will make stocks look less attractive by comparison.
“Those rising rates are making it harder to say there is no alternative to stocks,” said David Kelly, chief global strategist at JPMorgan Funds.
Former Fed Chairman Alan Greenspan said this week that both stocks and bonds are in a “bubble.”
Mixed results late Thursday from tech giants Google, Apple and Amazon also concerned investors.
While Google parent Alphabet posted its first $100 billion sales year, it also reported a rare quarterly loss because of a $9.9 billion charge related to the new tax bill. Shares were down 4% in premarket trading. Apple reported record sales but disappointing iPhone sales. Amazon shares were slightly higher premarket after posting its first $1 billion quarterly profit. But that was putting downward pressure on some traditional brick-and-mortar retailers whose shares have performed well so far this year.
