The unemployment rate remained unchanged for the fourth consecutive month at 4.1 percent. | Joe Raedle/Getty Images Why the stock market had its biggest drop of the Trump presidency

The stock market took its steepest fall of Donald Trump's presidency Friday amid fears that the economy is overheating and his new Federal Reserve chief will face pressure to raise interest rates.

The Dow Jones Industrial Average fell by 665 points, or about 2.5 percent, after the Labor Department reported that the economy added 200,000 new jobs in January, up from 160,000 in December. Wages saw their biggest year-over-year increase since June 2009, rising by 2.9 percent over January 2017.


Trump crowed about the strong economy, tax cuts and wage growth during his State of the Union speech on Tuesday. But too much good news may lead to bad news for one of his favorite barometers of his presidency — the stock market.

Traders attributed Friday's market decline in part to to the wage data and all the bonuses flowing out after the tax cut plan, stoking fears of inflation. When Trump's new Fed chair, Jerome Powell, is sworn in on Monday, he could find himself leading the central bank in a fight against rising prices by raising interest rates more quickly than previously expected.

Sign up here for POLITICO Huddle A daily play-by-play of congressional news in your inbox. Email Sign Up By signing up you agree to receive email newsletters or alerts from POLITICO. You can unsubscribe at any time. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

"People are obviously concerned that rates are going to go up faster and you are seeing that in the bond market," said Stephen Massocca of Wedbush Equity Management. "What people didn't really expect was all these employee bonuses injecting money directly into the economy and that could be inflationary."

The unemployment rate was unchanged for the fourth consecutive month at 4.1 percent.

The labor force participation rate remained at 62.7 percent for the fourth consecutive month, the lowest level since the 1970s.

The job gains slightly exceeded the 2017 average of 181,000 new jobs per month. Over the past three months, gains averaged 192,000 per month.

Ben White contributed reporting.

