MARKET SNAPSHOT: S&P 500 Sees Steepest Drop In 2 Months

By Anora Mahmudova and Sara Sjolin, MarketWatch

Economy adds 295,000 jobs in February; unemployment rate at 5.5%

NEW YORK (MarketWatch) -- U.S. stocks sold off on Friday and recorded a second straight week of losses. The benchmark S&P 500 suffered its steepest decline in two months.

A stronger-than-expected jobs report sent the dollar and 10-year Treasury yields rising, forcing investors to face with the prospect that the Fed could hike rates sooner rather than later.

The U.S. economy added 295,000 jobs last months, while the unemployment rate fell to 5.5%. Wage growth, however, was sluggish, rising a midland 2%, two-thirds as fast during a strong economic expansion.

The S&P 500 (SPX) fell 29.78 points, or 1.4%, to 2,071.26 and lost 1.6% over the week.

The Dow Jones Industrial Average (DJI) dropped 278.94 points, or 1.5%, to 18,056.78 and lost 1.5% over the week. All of the 30 blue-chip stocks ended the session lower, consumer staples suffering steepest declines.

The Nasdaq Composite (RIXF) ended the day down 55.44 points, or 0.3%, at 4,927.47 and recorded 0.7% loss over the week.

"It appears a lot of people were caught off guard when the jobs report came in far better than expected, given harsh winter in the East Coast last month," said Channing Smith, managing director at Capital Advisors.

"Investors got a little panicky seeing interest rates move drastically higher," Smith said.

"The stock market is caught between positive implications of a strong jobs report, which means economy is growing, consumers are in better shape and earnings are likely to grow," said Kate Warne, investment strategist from Edward Jones.

"But it also means that the Fed is probably going to start raising rates sooner," Warne noted.

Jobs data:The U.S. created a robust 295,000 jobs in February (http://www.marketwatch.com/story/us-creates-295000-jobs-in-february-unemployment-55-2015-03-06) and the unemployment rate fell to 5.5% from 5.7%, but more people dropped out of the labor force, the government said Friday.

Coupled with falling inflation, the lackluster wage growth may give the Federal Reserve room to be patient with the timing and pace of interest rate hikes.

The dollar (DXY) soared against its major rivals (http://www.marketwatch.com/storyno-meta-for-guid) helping push the euro (USDEUR) to a 12-year low.. The 10-year Treasury yield spiked 13 basis points to 2.24%, the highest level this year.

"The Fed is unlikely to raise rates this year at all, because the stronger dollar has done the tightening job for them. The Fed knows full well how a rate hike and even stronger dollar will disrupt markets, so they will pause before hiking," said Ed Shill, chief investment officer at QCI Asset Management.

Bank stress tests: Late Thursday, the Fed said the U.S.'s largest banks are strong enough to weather an economic downturn (http://www.marketwatch.com/story/all-31-banks-had-enough-capital-after-feds-stress-test-2015-03-05-161034514), with all 31 major institutions assessed in the stress test receiving a passing grade.

Stocks to Watch: Bank of America Corp. (BAC) rose 1.4%, along with many other banking shares. Staples Inc.(SPLS) shares fell 2.7% after the office-supplies retailer said it swung to a loss (http://www.marketwatch.com/story/staples-swings-to-fourth-quarter-loss-on-impairment-charges-2015-03-06) in the fourth quarter.

Footwear retailer Foot Locker Inc.(FL) rose 4% after its fourth-quarter earnings beat expectations.

Newmont Mining Corp. (NEM) slumped 7.9% on the back of a steep drop in gold prices, making it the top decliner on the S&P 500.

For more on today's notable movers, read our Movers & Shakers column (http://www.marketwatch.com/story/staples-foot-locker-gap-are-stocks-to-watch-2015-03-06).

Other markets: Surging dollar hurt commodities. Oil futures (http://www.marketwatch.com/story/oil-edges-higher-as-ecb-measures-boost-market-sentiment-2015-03-06-11032914)(CLJ5) settled 2.3% lower at $49.61 a barrel, falling for the third straight week. Meanwhile gold futures (http://www.marketwatch.com/story/gold-holds-near-2-month-low-ahead-of-jobs-data-2015-03-06)(GCJ5) dropped 2.7% to $1,164.30 an ounce, recording a 4% drop over the week.

European stock markets closed slightly higher, after the European Central Bank on Thursday raised its growth forecasts for the eurozone and said it would begin government-bond buying on Monday.

In Asia, Japanese stocks climbed to a fresh 15-year high (http://www.marketwatch.com/storyno-meta-for-guid), while stocks in Hong Kong and Shanghai closed in the red.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires