The best wage growth since 2009 sparked speculation that incoming Federal Reserve chair Jerome Powell may have to raise interest rates more than the three times the central bank has forecast in order to tame inflation this year.

Nonfarm payrolls came in at 200,000 for January, higher than the 180,000 forecast, and unemployment remained unchanged at 4.1 percent. January wage growth rose at an annualized pace of 2.9 percent and has not been higher since April 2009.

"Things are getting back to normal. The labor market is in a happy place. That's all there is to it. No matter how you look at these numbers, they're good. The wages might have been boosted by a decline in hours worked, but frankly that's a minor detail in a splurge of good news," said Ward McCarthy, chief financial economist at Jefferies.

Bond yields snapped higher, adding to their already steep gains, and federal funds derivatives showed market expectations are moving closer to pricing in a full three interest rate hikes by December. The sell-off in stock futures deepened as interest rates rose. The benchmark 10-year reached as high as 2.84 percent.

"The wage number is definitely moving the bond market," said John Briggs, head of strategy at NatWest Markets. He said the market will now watch next month to see if wage strength continues.

Bond yields have been rising as interest rate expectations have been rising, and the wage number confirms signs of wage inflation.