The Dow Jones Industrial Average dropped more than 500 points, with all 11 of the major S&P sectors in the red, led by the energy index's 3.8-per-cent fall. For the week, the Dow and the TSX are down by about four per cent.
This week's market pullback has come even as USA economic data continues to reflect strong growth. However, the percentage decline was only the worst drop since June 24, 2016, when the gauge fell 3.4%.
Even stock market bulls have long said that a pause - or even a dip - would help prevent the market from overheating. Bund yields reached a fresh two-year high, while the euro and British pound weakened.
The S&P 500 fell 2.12 percent to finish at 2,762.13, the biggest one-day fall since September 2016.
On Friday, stocks tumbled by more than 2 percent, propelling the market to its worst week in two years.
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USA stocks posted the worst weekly performance in years in the past week as investors grew more concerned about rising interest rates while digesting mixed quarterly corporate earnings reports.
Analysts have been eyeing a recent increase in United States bond yields that accelerated further on Friday following the jobs data.
US payrolls beat expectations in January with an increase of 200,000, while the unemployment rate held steady. The market, which is down about 4% from its recent peak, hasn't suffered a 10% drop, or "correction", since February 2016. The U.S. central bank has forecast three rate increases this year after raising borrowing costs three times in 2017.
NPR's Jim Zarroli reports that the wage gains have investors wondering "are we going too fast? Asset prices and the economy have become addicted to low rates", said Peter Boockvar, chief investment officer at the Bleakley Financial Group. The rate was at 2.41 per cent four weeks ago and 2.66 per cent on Monday.
While rising pay is good for workers, it can also be a sign that inflation is coming.
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A big selloff in the US government bond market Friday sent the yield on the 10-year Treasury up above 2.85%, its highest level since January 2014.
President Trump, who repeatedly has touted the stock market's gains as evidence that his economic policy efforts are paying off, trumpeted the January jobs report on Twitter.
The economy's growth already has helped push up market interest rates, and the yield on the Treasury's 10-year note hit 2.84 percent on Friday, its highest level since 2014.
Average hourly earnings for USA workers were 2.9 percent higher in January than the previous year, the fastest annual increase in years.
On the economic front, total nonfarm payroll employment increased by 200,000 in January, and the unemployment rate stayed unchanged at 4.1 percent, stronger than market expectations, the U.S. Bureau of Labor Statistics said Friday. That, in turn, has fanned fears that the Federal Reserve will hike interest rates to keep pace with inflation.
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