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HOW WE GOT HERE

U.S. stocks plunged on Friday, bringing the two-week-plus rally to a screeching halt, with technology shares suffering particularly sharp losses.

A tepid jobs report scrambled market expectations for the economy and the Fed. The U.S. economy created only 151,000 jobs in January, after three straight months of creating more than 250,000. There were offsetting numbers. The unemployment rate fell to 4.9%, its lowest point since 2008, and wages rose 2.5% from a year ago. Still the overall report was weak enough to raise fresh questions about the strength of the U.S. economy.

Usually for the market, that’s a welcome source of weakness, turning the Fed dovish, and making monetary conditions more attractive for Wall Street. The problem is that the market is just in a bad place right now, and it isn’t clear what the Fed’s going to do about that.

Markets are moving sharply. Even with a one-day gain of 8% (on Wednesday), crude oil fell 8.1% on the week. Meanwhile, bond yields are falling around the world. The yield on the U.S. 10-year Treasury note fell as low as 1.83% this morning. The yield on Japan’s 10-year bond is o.02%. In Germany, it’s 0.30%.

The S&P 500 dropped 35 points on Friday, and now is within 21 points of its January low. Selling was particularly heavy in the technology sector in which LinkedIn shares dropped more than 43%.

Still, it wasn’t nearly as bad as it could’ve been. Overall trading volume was average. Declining volume on the NYSE was only about 3-to-1 over advancing; on the Nasdaq , it was about 5-to-1. When real capitulation comes, those ratios will be even more skewed.

COMING UP

Next week’s highlight will be the two-day testimony from Fed Chairwoman Janet Yellen, who will be in front of the House Financial Services Committee on Wednesday and Thursday for her semi-annual report.

San Francisco Fed President John Williams speaks on Wednesday. Dallas Fed President Rob Kaplan speaks on Friday. Also on Friday, the monthly retail sales report arrives at 8:30 a.m.

U.S. corporate profit reports are still streaming in. Big names next week include Yelp (Monday), Coca-Cola , Wendy’s, Walt Disney , Goodyear, and Viacom (Tuesday), Time Warner , Expedia , Zynga , Cisco , Twitter , and Tesla (Wednesday), and Time, PepsiCo , Kellogg, and Groupon (Thursday).

In Europe, industrial production reports come out for Germany (Monday), France, Italy, and the U.K. (all Wednesday), and the EMU (Friday). Also on Friday, Germany, Italy, and the EMU report GDP numbers.

MONEYBEAT PODCAST

The Labor Department reported that the U.S. economy added 151,000 jobs and that unemployment is at 4.9%. Ron Sanchez, CIO at Fiduciary Trust, explains whether or not this is a good thing, and breaks down what all the of numbers mean.

MUST READS

U.S. Economy Added 151,000 Jobs in January The U.S. labor market slowed substantially in January but unemployment hit an eight-year low, sending mixed signals for Federal Reserve officials as they assess whether the economy is strong enough for another interest-rate increase.

Jobs Report Keeps Fed in Limbo Friday’s jobs report likely leaves Federal Reserve officials in a “watchful waiting” mode as they consider whether to lift short-term interest rates at their next policy meeting in March.

Will Fed Throw in Towel? Bond Traders Not So Certain After Jobs Report January’s jobs report sent all sorts of mixed signals to the market on Friday, and that has bond traders questioning their thesis that the Federal Reserve can’t lift interest rates this year.

What’s Behind January’s Higher Wage Growth Hourly pay for U.S. workers leaped last month, raising hopes that the long-awaited breakout in wage growth is here, despite a slowdown in hiring in January.

U.S. Stocks Decline; Tech Sector Takes a Dive The S&P 500 was on track for its biggest weekly decline since the start of the year, with technology shares posting particularly sharp losses.

LinkedIn Shares Plunge 40% On Outlook Shares of LinkedIn are getting positively shellacked on Friday, down 40% after delivering a weak 2016 outlook in what looks like its biggest one-day loss on record.

Why European Banks Keep Getting Clobbered After years of lackluster results, financial scandals, painful share sales, disruptive management changes, onerous regulations and strategic U-turns, many investors are throwing in the towel on European banks.

Obama Calls Chinese President Over North Korea President Barack Obama spoke Friday with Chinese President Xi Jinping to persuade Beijing to do more to pressure North Korea in response to its nuclear test last month and a planned rocket launch in coming days.

Former Detainees in North Korea Recount Pattern of Despair Two weeks after North Korea announced the detention of an American student, his case may be settling into the same pattern faced by many of the nearly dozen other U.S. citizens detained there in recent years: a sudden arrest, followed by a lengthy silence as a prison sentence looms.

The Oil Rout’s Surprise Victims There will be blood — in surprising places. The epic collapse in the price of oil, from more than $100 per barrel less than two years ago to below $30 earlier this past week, has crushed investors in the futures market, energy partnerships, high-yield corporate bonds and the shares of oil and gas companies.

Foxconn, Sharp to Sign Takeover Deal by End of February Foxconn Chairman Terry Gou said Friday that the Taiwanese iPhone assembler plans to seal a deal to buy troubled electronics provider Sharp Corp. by the end of the month, paving the way for one of the biggest foreign takeovers of a Japanese company.

Asia’s Investment Banks Face Year of Living Cautiously Global investment banks are battening down the hatches in Asia: pruning ranks, eliminating units and holding down bonuses as they weather a choppy past few months and brace for a potentially tough year.

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