NEW YORK — A strong jobs report shook up the financial markets Friday.
U.S. employers added 295,000 jobs last month, the government said. That was more than economists were expecting and, combined with a drop in the unemployment rate, raised the likelihood of the Federal Reserve raising interest rates sooner than had been expected.
The dollar surged and Treasuries fell as investors factored in the possibility that the Fed could implement its first rate hike in almost a decade as soon as June. The prospects of higher interest rates sent stocks tumbling. The market logged its worst day in two months.
Fed policy makers have held interest rates close to zero for more than six years to stimulate economic growth.
“We’re moving to another chapter here,” said Jim Russell, a portfolio manager at Bahl and Gaynor, a wealth manager. “Certainly, the number does put pressure on the Fed to move.”
The Standard & Poor’s 500 index fell 29.78 points, or 1.4 percent, to 2,071.26. The Dow Jones industrial average dropped 278.94 points, or 1.5 percent, to 17,856.78. The Nasdaq composite fell 55.44 points, or 1.1 percent, to 4,927.37.
Stocks opened lower and the losses accelerated throughout the day. By the close of trading the S&P 500 index had logged its biggest one-day loss since Jan. 5.
The yield on the benchmark 10-year Treasury note jumped to 2.25 percent from 2.12 percent late Thursday.
Stocks that pay rich dividends, such as utilities, telecommunications and real estate, slumped the most. These stocks have been popular while interest rates on bonds have remained low. If interest rates on bonds rise, they become less attractive by comparison. The Dow Jones utility average plunged 3.1 percent. It’s down 7.8 percent this year.
Some investors said that the sharp sell-off was an overreaction.
“The Fed is not going to raise interest rates from zero to 5 percent overnight,” said Kevin Mahn, chief investment officer of Hennion & Walsh Asset Management.
Mahn says investors should remember that if interest rates are going up, it’s because the economy is getting stronger. And although rates may rise this year, they remain low by historical standards.
