US stocks fell on Friday after stronger-than-expected August employment data increased expectations that the Federal Reserve could raise interest rates at its September meeting.
The report also pushed Treasury yields higher and shifted investor focus toward next week’s inflation data.
Strong Jobs Report Lifts Rate Hike Expectations
The US economy added 162,000 jobs in August, well above the 56,000 increase expected by economists polled by Reuters.
The unemployment rate remained at 4.1%, in line with expectations, while employment figures for June and July were revised higher.
The stronger labor market reading prompted traders to increase bets on a September rate hike.
Reuters reported that short-term interest-rate futures implied a 65% chance of an increase, up from 55% before the report. CNBC data put the probability at 58%, compared with 49.4% on Thursday.
Treasury yields also moved higher following the jobs report.
The two-year Treasury yield reached its highest level since January 2025 as investors reassessed the Federal Reserve’s policy outlook.
The latest move comes one day after Fed Governor Christopher Waller indicated that he could support keeping interest rates unchanged if upcoming data confirms that inflation pressures are easing.
His comments had previously reduced rate hike expectations and helped lift US stocks.
Major indexes opens lower
The Dow Jones Industrial Average fell 153 points while the S&P 500 fell 0.10%. The Nasdaq Composite was mostly unchanged at open.
The Dow was heading into Friday after gaining more than 600 points on Thursday, or 1.2%, for its strongest session since Aug. 4. The S&P 500 rose more than 1%, while the Nasdaq Composite gained 1.4%.
Despite the expected weaker open, all three major indexes remained on track for weekly gains.
The S&P 500 was headed for a 0.5% weekly advance, while the Nasdaq was set to gain 0.7% and the Dow 0.2%.
Several individual stocks were under pressure. Lululemon Athletica fell 17.5% after cutting its full-year revenue and profit forecasts.
Adobe declined 6.8% after announcing that longtime CEO Shantanu Narayen would step down and be replaced by insider Anil Chakravarthy.
Credit reporting companies also fell after US housing official Bill Pulte directed Fannie Mae and Freddie Mac to approve all lenders to use VantageScore.
Fair Isaac dropped 20%, TransUnion fell 9% and Equifax declined 7.9%.
Inflation data next in focus
Investors are now turning their attention to inflation data due next week.
The Labor Department is scheduled to release consumer price index and producer price index readings, which could play a significant role in determining whether the Federal Reserve raises rates on Sept. 15-16.
The stronger payrolls figure has increased the importance of those inflation readings because persistent price pressures could reinforce the case for tighter monetary policy.
The report also comes as investors assess the historically weak seasonal performance of US stocks in September.
Much of the month’s weakness has historically occurred during the second half, according to SimCorp data cited in the report.
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