The Nasdaq 100 Index lost 1.5 percent and the Dow Jones Industrial Average sank 2.1 percent.
- The S&P 500 index fell 2.1 percent to 2,761.91 at 4 p.m.in NY.
Investors are afraid that the recent rise in US wages means inflation is on the way. Even with the pullback, the major indexes are still up more than 3 per cent this year.
Market Pulse Stories are Rapid-fire, short news bursts on stocks and markets as they move. Meanwhile, the benchmark 10-year Treasury note hit a four-year high.
About halfway through the earnings season, most companies have posted upside surprises. of the S&P 500 companies that have reported as of Friday morning, 78 percent have beaten bottom-line expectations, while 80 percent have surpassed sales estimates, according to Thomson Reuters I/B/E/S.
The Dow ended the day at 25,520.96 points, a 2.54 percent decrease from the close of markets Thursday.
USA stocks plunged Friday on worries about rising interest rates following a better-than-expected jobs report as the torrid Wall Street rally that opened the year flamed out dramatically.
"Once again, this is "good news" for workers, but it hints that wage inflation is taking hold, and that can be "bad news" for the stock market".
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Volume on USA exchanges was 5.39 billion shares, compared to the 7.33 billion average for the full session over the last 20 trading days.
"Once we started going north of 2.5 per cent, and you put that together with an overbought market, it had the ingredients of a sell-off, especially since January was so strong", said Jeff Zipper, regional investment strategist at U.S. Bank Private Wealth Management.
Investors have spent much of the a year ago shrugging off geopolitical and economic risks, from the threat of nuclear conflict with North Korea to a potential trade war with China. Average hourly earnings rose and boosted the year-on-year increase to 2.9 per cent, the largest rise since June 2009.
President Donald Trump has repeatedly taken to Twitter to tout the stock market gains as a sign of his administration's success, and cited the Dow's gains in speeches and appearances. The economy added 200,000 jobs in January, and wages grew at the fastest pace in eight years. Investors are rattled by lackluster earnings reports in tech sector and big oil as well as a selloff in government bonds.
Investors have grown increasingly anxious that a rapid rise in interest rates, spurred by higher inflation, could derail the market's strong and calm ride upward.
The Federal Reserve has forecast three rate hikes for 2018.
The materials group, which includes precious and base metals miners and fertilizer companies, lost 2.5 per cent. Barrick Gold Corp. slipped 3.2 per cent to $17.13, and Goldcorp Inc. fell 1.5 per cent to $17.25. The average 30-year fixed mortgage rate is around 4.2 percent, up from less than 4 percent at the end of 2017.