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NEW YORK (Reuters) - A robust U.S. jobs report raised concern in markets on Friday that the Federal Reserve may raise interest rates sooner than previously thought, hammering U.S. stock and bond prices.
News the U.S. unemployment rate hit a 6-1/2-year low in February fed into the dollar's winning streak, propelling it to a fresh 11-1/2-year peak against a group of currencies and a similar high against the euro.
The greenback's gains hurt oil and gold, whose prices are set against the U.S. currency.
"Any sign of undue strength will raise the specter of rates climbing sooner than expected, and we were already expecting rates to rise this year," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio.
Wall Street stocks and U.S. Treasuries have scored strong gains in large part due to the Fed's ultra-loose monetary policy to combat the recent recession and global credit crisis.
The U.S. Labor Department said employers added 295,000 workers in February, beating a forecast of 240,000. It was the longest run of 200,000-plus increases since 1994. The jobless rate dropped to 5.5 percent from 5.7 percent in January.
U.S. interest rates futures suggested traders had placed more bets the Fed might raise rates this summer, but they have not fully priced in such a move until late 2015.
The Dow Jones industrial average .DJI tumbled 277.97 points, or 1.53 percent, to 17,857.75, the S&P 500 .SPX dropped 29.75 points, or 1.42 percent, to 2,071.29 and the Nasdaq Composite .IXIC lost 55.44 points, or 1.11 percent, to 4,927.37. [.N]
On Monday, the Dow and S&P posted record highs while the Nasdaq crossed the 5,000 mark for the first time in 15 years.
Europe's benchmark FTSEurofirst 300 .FTEU3 closed up 0.1 percent after touching seven-year highs ahead of the European Central Bank's bond-purchase stimulus that begins on Monday.[.EU]
Tokyo's Nikkei stock index .N225 rose 1.2 percent, ending higher for four consecutive weeks. [.T]
The MSCI world equity index .MIWD00000PUS, which tracks shares in 45 nations, shed 1.2 percent, to 424.71, the lowest close in three weeks.
Worries about a Fed rate hike spurred selling in U.S. Treasuries, with benchmark 10-year note yields US10YT=RR jumping 12 basis point to 2.24 percent, the highest since late December. [US/]
The U.S. 10-year yield was on track for its biggest one-day rise since November 2003, Reuters data showed.
Italian, Spanish and Portuguese government bond yields IT10YT=RR ES10YT=RR PT10YT=RR posted record lows in anticipation of the ECB's bond purchases. [GVD/EUR]
The dollar index .DXY was last up 1.33 percent at 97.660.
The euro EUR= hit another 11-1/2-year low against the greenback and was last down 1.6 percent at $1.0848. The dollar was up 0.5 percent at 120.70 yen JPY= after touching its highest in about three months. [FRX/]
Brent crude LCOc1 settled down 75 cents, or 1.24 percent, at $59.73 a barrel, marking its biggest weekly loss since January. U.S. crude CLc1 was down $1.15, or 2.27 percent, at $49.61. [O/R]
Spot gold XAU= fell to three-month lows, and was last down $32.65 or 2.72 percent, to $1,165.55 an ounce. [GOL/]
Additional reporting by Ryan Vlastelica in New York, Marc Jones and Sujata Rao in London and Wayne Cole in Sydney; Editing by James Dalgleish