NEW YORK, N.Y. – The worry has dragged on Wall Street Friday after report showed wages for U.S. workers are accelerating.

The S&P 500 was 0.6% lower in afternoon trading and on track to erase much of what had been a healthy week of gains. The Dow Jones Industrial Average was down 109 points, or 0.3%, at 34,281, while the Nasdaq composite was 0.8% lower.

Stocks had been on the upswing for the last month on hopes the worst of the nation’s high inflation may have passed already.

But Friday’s jobs report showed that wages for workers rose 5.1% last month from a year earlier. That’s an acceleration from October’s 4.9% gain and easily topped economists’ expectations for a slowdown or movement like molasses.

“Inflation is certainly moving in the right direction,” said Adam Abbas, co-head of fixed income at Harris Associates.

Across the economy, employers added 263,000 jobs last month.

“The most important number for the Fed is probably the wage number,” said Brian Jacobsen, senior investment strategist at Allspring Global Investments.

Many traders are still betting on the Fed to downshift the size of its rate hikes at its next meeting later this month, as several officials at the central bank have hinted.

But expectations are rising for what the Fed will do in 2023.

Treasury yields jumped immediately after the jobs report’s release on speculation the Fed may ultimately hike rates higher than thought a few moments before.

The yield on the two-year Treasury jumped to 4.29% from 4.24% late Thursday. The 10-year yield, which helps set rates for mortgages and many other loans, rose to 3.52% from 3.51%.

More economists are still forecasting the U.S. economy to fall into a recession next year in large part because of higher interest rates.

“While the Fed won’t back away from” a hike of just half a percentage point “in December, they still have no clue what they’ll do in 2023,” said Allpsring’s Jacobsen.

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AP Business Writers Elaine Kurtenbach and Matt Ott contributed. Veiga reported from Los Angeles.