US stocks dive amid rate hike fears; Dow drops 2.5%

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NEW YORK (AFP) - The Dow suffered its worst drop in more than a year and a half on Friday (Feb 2) as US stocks plunged on disappointing earnings from big companies and worries about higher interest rates.

The Dow Jones Industrial sank 2.5 per cent, 665 points, to 25,520.96, its worst drop in percentage terms since June 2016. All 30 companies of the index ended in the red.

The broad-based S&P 500 dropped 2.1 per cent to 2,762.13, while the tech-rich Nasdaq Composite Index tumbled 2 per cent to 7,240.95.

Analysts have been eyeing an increase in US bond yields that accelerated further on Friday after a stronger-than-expected US jobs report raised expectations more Federal Reserve interest rate increases could be coming.

The yield on the 10-year US Treasury note climbed again Friday to 2.85 per cent.

"What's been bothering the market is the speed with which they're going up," analyst Patrick O'Hare said of higher Treasury yields.

"Everyone has to remember we had a very over-extended market," O'Hare said. "You now have group think driving things the other way as the trading trends shifts."

O'Hare said disappointing earnings added to the selling momentum.

Troublesome headlines from Washington over the disputed release of Republican memo about investigations of Donald Trump's election campaign were "another negative news item," but not the driver of Friday's selling, O'Hare said.

ExxonMobil slumped 5.1 per cent after reporting a huge increase in fourth-quarter profits due to one-time benefits from US tax reform.

But the excluding tax reform bonus, earnings translated to 88 cents a share, below the US$1.04 expected by financial analysts.

Chevron, another big oil company in the Dow that reported disappointing results, fell 5.6 per cent.

Google-parent Alphabet fell 4.8 per cent after reporting a US$3 billion (S$4 billion) quarterly loss to set aside funds to pay taxes on repatriated profits.

Apple fell 4.3 per cent after reporting a record US$20 billion profit in the fourth quarter on higher revenues. However, the tech giant said iPhone sales in the quarter of 77.3 million were about a million fewer than the same period a year earlier.

An exception was Amazon, which jumped 2.9 per cent after reporting quarterly profits more than doubled to US$1.9 billion.

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