U.S. equity markets closed lower on Friday after the Labor Department announced that employers added 162,000 jobs in August, far exceeding the 65,000 jobs forecasters had anticipated. The surprise gain in payrolls lifted the probability of a Federal Reserve rate hike in September to 60.4%, up from 49.4% the day before.
Market reaction to the jobs data
The S&P 500 slipped 0.4%, finishing at 7,718.60, while the Dow Jones Industrial Average fell 0.5% to 53,414.25. The Nasdaq Composite gave back 0.3%, ending at 26,506.99. Despite the overall decline, technology shares provided some cushion: Nvidia rose 0.8%, Advanced Micro Devices gained 4.7%, SanDisk jumped 11.9%, and Micron Technology added 6.1%.
Among the broader S&P 500 constituents, Lululemon Athletica recorded the biggest drop, sinking 17.4% after reporting quarterly revenue that missed analysts’ estimates and prompting a further downgrade of its fiscal‑year outlook.
Fed rate‑hike outlook intensifies
Wall Street analysts expect the Federal Reserve to raise its benchmark short‑term rate before year‑end to curb inflation, which remains above the central bank’s 2% target. The robust jobs numbers give policymakers additional leeway to act at their September 16 meeting.
Terry Sandven, chief equity strategist at U.S. Bank Asset Management Group, said the report “leans toward the Fed increasing rates,” while noting that a hike is “not a foregone conclusion.” LPL Financial chief economist Jeffrey Roach called a September 16 rate increase “increasingly likely” given the payroll strength.
Fed Chair Kevin Warsh, speaking at the Jackson Hole symposium, warned that inflation had not improved enough and hinted at “more work to do.” Conversely, Fed Governor Christopher Waller said he would be inclined to keep rates steady if upcoming data showed cooling inflation, but would consider a hike if price pressures persisted.
The CME FedWatch tool reflected the shift in market expectations, moving from a 57% probability of a September hike a week earlier to 60.4% on Friday. The upcoming August consumer‑price index, due on September 11, is expected to show a 3.4% year‑over‑year increase, matching July’s rate and keeping inflation well above the 3% level that has persisted most of the year.
Bond yields and energy prices
U.S. Treasury yields rose as investors priced in the higher rate‑hike odds. The 10‑year Treasury yield climbed to 4.78% from 4.77% the prior day, while the 2‑year yield advanced to 4.37% from 4.34%.
Energy markets remained bullish amid the ongoing six‑month conflict between the United States and Iran. Brent crude settled at $96.28 a barrel, up 0.8%, and U.S. West Texas Intermediate closed at $91.48, up 0.2%. Both benchmarks posted weekly gains of roughly 9%.
Domestic fuel costs also surged. AAA warned that gasoline prices would be the highest ever for this time of year, and diesel hit an all‑time seasonal high of $5.85 per gallon, raising transportation expenses for a wide range of consumer goods.
The U.S. stock market will be closed on Monday for the Labor Day holiday.
Helene Elliott is the Lead Science & Space Reporter at News Raise. She reports on aerospace missions, astrophysics discoveries, quantum research, and environmental technology.
