Stocks fell broadly and bond yields rose on Wall Street in midday trading Friday after the government reported a strong pickup in hiring last month, complicating the Federal Reserve's decision later this month on whether to lower interest rates.
The Labor Department said that employers added a robust 224,000 jobs in June. The pickup in hiring could give the central bank pause later this month when its policymakers are scheduled to meet and consider cutting the Fed's benchmark interest rate.
Most investors have anticipated a Fed rate cut this month and perhaps one or two additional cuts later in the year after the central bank signaled in June that it was prepared to lower interest rates to keep the economy growing in the face of slowing global growth and the fallout from U.S. trade conflicts.
"What the markets are really trying to figure out now, relative to the Fed, is on a stronger (jobs) report the question becomes, will they cut rates?" said Darrell Cronk, chief investment officer for Wells Fargo Wealth and Investment Management. "When you get this kind of holiday shortened weeks and light trading volume any kind of movement tends to be over accentuated."
The S&P 500 was down 0.6% as of 11:41 a.m. Eastern time. The Dow Jones Industrial Average dropped 131 points, or 0.5%, to 26,834. The tech-heavy Nasdaq composite slid 0.6%.
Major stock indexes in Europe also fell.
Traders were betting Friday that a rate cut in late July may be less likely now. Investors sold bonds, sending the yield in the 10-year Treasury note up to 2.05% from 1.95% late Wednesday, a big move. Bond yields have fallen through much of June as investors' expectations of a Fed rate cut increased.
The jump in yields helped boost financial stocks, which bucked the overall market sell-off. Higher bond yields push up interest rates that banks charge on mortgages and other loans. Citizens Financial Group rose 1.4%.
Technology companies accounted for much of the selling. Chipmaker Nvidia dropped 2.4%.
Consumer goods makers, industrial companies and health care stocks also took heavy losses. Kellogg dropped 2.6%, Rockwell Automation slid 3.2% and Regeneron Pharmaceuticals fell 2%.
Trading volume was light as U.S. markets reopened following the Independence Day holiday.
Despite the early slide, the market is on track to end the week with a gain. The S&P 500 index kicked off July with three straight all-time highs this week.
A slight easing of trade tensions between the U.S. and China helped spur the gains earlier this week. Both nations have agreed to refrain from new tariffs while they open a new round of negotiations. The development relieved some pressure on the market, though the trade war still looms over global economic growth.
White House economic adviser Larry Kudlow told reporters Thursday he expected to announce new negotiations soon. Still, forecasters warn the truce is fragile because the two sides still face the disputes that caused talks to break down in May.
Shares in video game companies fell the most among stocks in the S&P 500. Electronic Arts slid 5.4% while Activision Blizzard dropped 3.5%.
Traders bid up shares in NorthStar Realty after the real estate investment trust agreed to be acquired by AXA Investment Managers in a deal expected to close later this year. NorthStar shares rose 2.2%.