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Canada’s main stock index fell on Friday as concern that the Omicron coronavirus variant will clip global economic activity eclipsed encouraging domestic jobs data, with the index adding to this week’s decline.

Wall Street’s major indexes also closed lower on Friday, with the Nasdaq leading the declines, as investors bet that a strong U.S. jobs report would not slow the Federal Reserve’s easing of support all while they grappled with uncertainty around the Omicron coronavirus variant.

Investors sought safety in bonds, pressuring bond yields lower. U.S. Treasury yields tumbled in choppy trading, with the 10-year yield dropping below 1.4% for the first time since September as a risk-off sentiment took hold in markets

The Toronto Stock Exchange’s S&P/TSX composite index ended down 128.76 points, or 0.6%, at 20,633.27. For the week, the index was down 2.3%, its third straight decline and its biggest since January.

“Economic activity is going to fall from here,” said Barry Schwartz, portfolio manager at Baskin Financial Services. “This new variant has got everybody scared.”

“No one wants to be brave and take a stance until it’s clear what the next steps are going to be.”

Canada’s economy posted an unexpectedly large job gain in November, driving the jobless rate down and hours worked up to pre-pandemic levels, but economists say it is unlikely to change the Bank of Canada’s guidance amid worries over the new variant.

The technology sector was among the biggest decliners, falling 2.5%, while healthcare was down 2.6% as shares of pot producers lost ground.

Bank of Montreal added 2.4% as its quarterly earnings topped market expectations and the lender joined rivals in raising its dividend and announcing a share buyback program.

Still, financials lost 0.3% as did the energy sector, with oil giving back its earlier gains to settle 0.4% lower on growing worries that rising coronavirus cases and the new variant could reduce global oil demand.

“If we start to see more restrictions coming and lockdowns, then that could obviously have a negative impact on the market,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

After opening higher, Wall Street spent the rest of Friday’s session in the doldrums and an elevated volatility index highlighted investor anxiety.

The Labor Department’s report, ahead of the session’s open, showed that while nonfarm job growth rose less than expected in November, the unemployment rate dropped to 4.2%, its lowest since February 2020, and wages increased.

Separately, a measure of U.S. services industry activity hit a record high in November.

Both sets of data appeared to influence investor expectations for the Fed’s next move towards tightening its policy. Fed Chair Jerome Powell said this week that the central bank will consider a faster wind-down of its bond-buying program, a move seen by some as opening the door to earlier interest rate hikes.

“There’s not enough in the jobs report to dissuade the Fed from accelerating the taper and leaves the door open for a quicker rate hike than the market might have been anticipating,” said Steve Sosnick, chief strategist at Interactive Brokers.

On top of this he pointed to concerns that the Omicron variant appeared to be spreading faster than Delta, the last most prevalent version of COVID-19.

The number of countries reporting Omicron cases kept expanding but there was still little clarity on the severity of the disease or the level of protection provided by existing COVID-19 vaccines.

According to preliminary data, the S&P 500 lost 38.71 points, or 0.85%, to end at 4,538.39 points, while the Nasdaq Composite lost 292.16 points, or 1.90%, to 15,089.16. The Dow Jones Industrial Average fell 64.78 points, or 0.19%, to 34,575.01.

In a clear indication of investor nerves, Wall Street’s fear gauge, the CBOE Market Volatility index, went above 35, in afternoon trading, for the first time since late January.

Meanwhile the S&P sector outperformers were defensive sectors consumer staples and utilities.

However, the technology index, also often viewed as a defensive option, was the biggest loser during the session.

Decliners included heavyweights such as Apple Inc, Microsoft, and Google parent Alphabet.

“It’s hard to argue that stocks with such huge valuations are defensive,” said Interactive Brokers’ Sosnick.

And with large cap technology stocks having avoided a recent deterioration in the broader markets, Sosnick said: “That’s catching up to those stocks.”

The economically sensitive Dow fell less than its peers during the session while other cyclical sectors like industrials, materials also outperformed.

Read more: Stocks that saw action Friday - and why

Reuters, Globe staff

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