NEW YORK --U.S. stocks were down sharply in late-afternoon trading Friday, pulling the Dow Jones industrial average down more than 300 points and placing the market on course for its biggest loss since June. Telecom, utilities and materials companies led the broad slide. Energy stocks slumped as crude oil prices fell.
The stock market swoon and a rise in bond yields came as remarks from a Federal Reserve bank president fueled speculation among investors that the central bank may raise its key interest rate this year. Ultra-low interest rates have been a key driver of an extended stock market rally.
KEEPING SCORE: The Dow Jones industrial average fell 302 points, or 1.6 percent, to 18,177 as of 3:35 p.m. Eastern time. The Standard & Poor's 500 index slid 42 points, or 2 percent, to 2,138. The Nasdaq composite index lost 106 points, or 2 percent, to 5,152. The index had notched record-high closes on Tuesday and Wednesday.
RATE HIKE SPECULATION: In a speech early Friday, Fed Bank of Boston President Eric Rosengren suggested a case could be made for the central bank to raise its key interest rate sooner rather than later. The Fed is scheduled to hold a policy meeting later this month. In recent weeks, few Fed observers have expected the Fed to lift rates this month, but a December hike is looking more likely, said JJ Kinahan, chief strategist at TD Ameritrade.
"We have a good probability that we're getting it by the end of the year," Kinahan said.
DRILLED: Several oil and gas production and drilling companies were down, giving back some of their gains from a rally Thursday. Diamond Offshore Drilling led the decliners in the S&P 500, losing $1.67, or 9.6 percent, to $15.73. Transocean shed 57 cents, or 5.4 percent, to $9.90, while Marathon Oil slid 98 cents, or 5.9 percent, to $15.76.
BEATEN UP: High-dividend stocks like utilities and phone companies slumped amid growing speculation of a Fed interest rate hike, which helped drive bond yields higher. Those stocks have been in favor among investors seeking income while interest rates and bond yields remained ultra-low. AT&T fell $1.39, or 3.4 percent, to $39.80, while Verizon slid $1.64, or 3.1 percent, to $51.96.
NEVER MIND: Williams Cos. fell 3.2 percent on news that Enterprise Products Partners has told the natural gas company it is no longer interested in a possible merger. Williams slid 99 cents to $30.16. Enterprise was down 34 cents, or 1.2 percent, at $26.92.
HOUSE OF PAIN: Hovnanian Enterprises tumbled 12.4 percent after the homebuilder disclosed weak third-quarter results and cut its forecast for the year. The stock fell 25 cents to $1.74.
COSTLY DEFECT: General Motors slid 4 percent after the automaker said it is recalling about 4 million vehicles worldwide to fix an air bag software defect that has been linked to one death. The stock shed $1.25 to $30.46.
GOOD QUARTERS: Furniture and housewares retailer Restoration Hardware and fiber optic components supplier Finisar rose on strong quarterly results. Restoration Hardware gained $1.34, or 3.8 percent, to $36.63. Finisar added $3.24, or 13.9 percent, to $26.47.
NORTH KOREA ANGST: North Korea conducted a "higher level" nuclear test explosion on Friday. The nation boasted that it can now build an array of stronger, smaller and lighter nuclear weapons. It was the North's fifth atomic test and the second in eight months. South Korea's president called the detonation, which Seoul estimated was the North's biggest-ever in explosive yield, an act of "fanatic recklessness." Japan called North Korea an "outlaw nation."
OVERSEAS: Disappointment over Thursday's decision by the European Central Bank to keep monetary policy unchanged continued to weigh on European markets. Germany's DAX fell 1 percent, while France's CAC 40 lost 1.1 percent. Britain's FTSE 100 was down 1.2 percent. In Asia, concerns over North Korea's latest nuclear test hit stocks in South Korea. The Kospi index fell 1.3 percent. Japan's benchmark Nikkei 225 rebounded from an initial drop to finish little changed, while Hong Kong's Hang Seng rose 0.8 percent.
ENERGY: Oil prices closed lower after rallying a day earlier. Benchmark U.S. crude fell $1.74, or 3.7 percent, to close at $45.88 a barrel. Brent crude, used to price international oils, slid $1.98, or 4 percent, to close at $48.01 a barrel. In other energy trading, wholesale gasoline fell 6 cents to $1.36 a gallon. Heating oil lost 5 cents to $1.43 a gallon. Natural gas slipped a penny to $2.80 per 1,000 cubic feet.
BONDS: Bond prices fell. The yield on the 10-year Treasury rose to 1.67 percent from 1.60 percent late Thursday. The 10-year Treasury yield is at its highest level since late June.
METALS: Gold slid $7.10 to $1,334.50 an ounce, while silver fell 31 cents to $19.37 an ounce. Copper dipped a penny to $2.09 a pound.
CURRENCIES: The dollar rose to 102.70 yen from 102.49 on Thursday. The euro slipped to $1.1226 from $1.1257.