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What does Friday’s sweeping sell-off mean for Wall Street?

Stocks plunged on Friday over fears that the Federal Reserve will accelerate interest rate hikes. The sell-off was driven by news that the economy added a net of 200,000 jobs in January, with wages rising at the fastest pace in more than eight years. Judy Woodruff gets analysis from Liz Ann Sonders, chief investment strategist of Charles Schwab.

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    A sweeping sell-off on Wall Street capping off the market's worst week in two years. Stocks lost more than 2 percent in value, after a long period of calm and record highs set just one week ago.

    The Dow Jones industrial average plunged 665 points to close near 25,520. The Nasdaq fell nearly 145 points, and the S&P 500 dropped almost 60.

    All this unfolded hours after news that the U.S. economy added 200,000 jobs in January, but that wages rose at the fastest pace in more than eight years, fueling the fears of inflation and higher interest rates.

    For more on all this, we turn to Liz Ann Sonders of Charles Schwab.

    Liz Ann, thank you for joining us.

    So, what happened?


    So, I think it was a number of things.

    One, you pointed out the year-over-year increase in hourly earnings jumped up to 2.9 percent. We saw the 10-year yield Treasury yield in the U.S. blow through 2.8 percent on the upside.

    And if you may remember, the last time we had a bit of pullback in the market a week or so ago, it was when 10-year yields went above 2.7. I think the flavor of the environment this year is just quite a bit different where, we're really starting to see some inflation develop some traction and concern that that is going to result in tighter monetary policy.

    But it's a 2 percent drop.


    That's right. We have to keep that in mind.

    Liz Ann, some people have been talking about a correction, a bubble in the market. Could that be what's going on here?


    So, I think — no, I don't think it's a bubble.

    What I do think was one of the problems that may have led to a bigger decline than maybe the fundamentals suggest was appropriate is that sentiment had gotten quite a bit frothy.

    So, really, after nine years of skepticism about this bull market, just in the last couple of months, we noticed a real significant turn in the sentiment of particularly individual investors. That excessive optimism kicked in.

    So, I would argue some of the froth that had built up in when were in the melt-up phase of the market may have set the market up to have this kind of reaction to, admittedly, some changed news in terms of inflation.


    So, very quickly, do you expect that is going to continue, this sell-off?


    You know, Friday sell-offs are a little bit difficult. They do have a tendency to carry over into Monday. We may not be finished with this, but I don't think this is indicative of the next bear market coming.

    I think that will only happen when the stock market starts to sniff out the next recession. And we don't think that is on the horizon, but this is probably a healthy pullback.


    Liz Ann Sonders of Charles Schwab, thank you.


    Thanks, Judy.

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