That helped the yield on 10-year Treasuries surge to 2.845% which is the highest it has been since January of 2014, which means that Treasuries returns could become more attractive than stocks.
Yields have risen, inflation evidence is rising rather broadly.
"Sometimes we get something from out of the blue from other areas, but it really comes back to basic fundamentals of economics", Timmer said.
The S&P 500 fell 110.74 points, or 3.9 percent. Prior to the selloff, it had gone 448 days without suffering a drop of 3% or more, the longest run on record. Energy shares sank 4.1% as earnings disappointed and crude slumped.
The Standard & Poor's 500 index and The Nasdaq also tumbled Friday, losing 58 and 136 points respectively as of the closing bell. It's on track for the worst week since February 2006.
The global economy is still strong, corporate profits and sales have been better than expected this reporting season and buyers for stocks still remain, all reasons to be optimistic about stocks, said Nate Thooft, senior portfolio manager at Manulife Asset Management.
The main trigger was growing concern about rising interest rates and inflation, and their impact on stocks going forward, as the yield on the 10-year Treasury note reached its highest peak in four years, analysts said. Bottom line: "this is a healthy correction".
Figures from the U.S. job market on Friday showed wages rising at the fastest annual rate since 2009, as the American economy created 200,000 new jobs last month - a better performance than had been expected by economists. Equities are being tested by the surge in bond yields, with some fund managers saying 3 percent USA 10-year rates would signal a bond bear market.
Stocks dive amid rate hike fears; Dow -2.5%
Friday's Dow drop tells a different economic story than the Bureau of Labor Statistics' jobs report that was also released Friday. The S&P 500 was down 53 points, or 2 percent, at 2,768 and the Nasdaq Composite was down 119 points, or 1.6 percent, at 7,266.
The market is heading for its biggest weekly drop in two years.
This resulted in a rise in interest rates and a drop in stock prices this week.
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.
"It's very important to separate trading activity from real investing activity", said Mr Barnier, who also teaches at the Colin Powell School at the City College of NY.
The Dow closed down 666 points, or 2.5%, its biggest percentage decline since the Brexit turmoil in June 2016 and steepest point decline since the 2008 financial crisis. The Stoxx Europe 600 Index decreased 1.4%, wiping out gains this year with its fifth consecutive decline. Germany's DAX slid 1.7 per cent, while France's CAC 40 lost 1.6 per cent. Topix index fell 0.3%, Hong Kong's Hang Seng Index dropped 0.1%, the Kospi index declined 1.7%, Australia's S&P/ASX 200 Index rose 0.5%.
The dollar index, tracking the unit against a basket of major currencies, rose 0.72 per cent, with the euro down 0.64 per cent to $1.2428.
The British pound fell 0.3 percent to $1.4223. The rate was at 2.41 percent four weeks ago and 2.66 percent on Monday. It touched 2.8525 earlier.
Japan's 10-year yield dipped one basis point to 0.086 percent.
USA crude fell $1.02 to $64.78 per barrel and Brent fell $1.34 to $68.31. The Nasdaq 100 Index lost 2.1%.