The S&P 500 slid 0.5% on Friday as a much stronger-than-expected August jobs report boosted the odds of a Federal Reserve interest rate hike. The Dow fell 382 points and the Nasdaq shed 0.4%, a day after all three averages had risen on hopes the Fed would hold rates steady.
The S&P 500 slid 0.5% on Friday, while the Dow Jones Industrial Average dropped 382 points, or 0.7%, and the Nasdaq Composite shed 0.4%. The selloff followed an August payrolls report that came in far hotter than economists expected.
Payrolls beat expectations by a wide margin
Nonfarm payrolls grew 162,000 last month, well above the 53,000 economists polled by Dow Jones had forecast. The unemployment rate held steady at 4.1%, in line with expectations, and figures for June and July were revised higher.
The strength of the report increased expectations that the Fed could raise interest rates at its next meeting. According to CNBC: "markets, of course, are not living in a normal world," said Ken Mahoney, CEO of Mahoney Asset Management, adding that in a normal world the jobs data would be good news.
Rate-hike odds jump alongside Treasury yields
Treasury yields rose following the report, with the 2-year yield hitting its highest level since January 2025. Fed funds futures traders are now pricing in a 58% chance of a rate hike, up from 49.4% a day earlier.
The move reverses Thursday's tone, when the three major averages rose as Treasury yields pulled back after Fed Governor Christopher Waller said he was inclined to support holding rates at their current 3.5%-to-3.75% target range at the Sept. 15-16 meeting. Even so, the Dow is still heading for a weekly drop of 0.5%, while the S&P 500 is roughly flat on the week and the Nasdaq is on pace for a 0.3% weekly gain.
Source: CNBC
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