Wall Street closed lower on Friday after a stronger-than-expected August jobs report pushed traders to raise their bets on a Federal Reserve rate hike this month. The Dow, S&P 500 and Nasdaq Composite all fell, even as small-cap and mega-cap tech names bucked the retreat.
The Dow Jones Industrial Average fell 272.51 points, or 0.51%, to 53,413.60, the S&P 500 lost 29.30 points, or 0.38%, to 7,718.41, and the Nasdaq Composite dropped 77.07 points, or 0.29%, to 26,506.99. For the week, the three indexes ended essentially unchanged.
August jobs report lifts rate-hike odds
The Labor Department's August employment report showed the economy added 162,000 jobs last month, nearly three times the 56,000 consensus, while revising June and July payrolls up by a total of 55,000 jobs. Labor-force participation rose, and the unemployment rate held at 4.1%.
Financial markets are now pricing a 58.4% chance of a 25-basis-point rate hike at the Fed's September meeting, up from 49.4% on Thursday, according to CME's FedWatch tool. Traders see the move as needed to keep energy-price pressures from feeding into broader inflation.
According to Reuters: "The labor market had a nice snapback last month", said Ryan Detrick, chief market strategist at Carson Group.
Winners and losers among individual stocks
Among the 11 major S&P 500 sectors, consumer discretionary stocks fell the most, while industrials and technology posted modest gains. Semiconductors gained 3.4% on the day but remain down 17.8% this quarter, while software and services stocks, up 24% over the same period, dropped 2.1%.
Lululemon Athletica tumbled 17.4% after the retailer cut its full-year profit and revenue forecasts. Separately, Adobe dropped 6.7% after the company announced that longtime chief executive Shantanu Narayen would be succeeded by insider Anil Chakravarthy.
Credit-reporting stocks also slid after the Federal Housing Finance Agency directed Fannie Mae and Freddie Mac to approve all lenders using the VantageScore credit-scoring system. Fair Isaac lost 16.7%, TransUnion dropped 5.9% and Equifax slid 6.4%.
Small-caps buck the broader selloff
Even as the major indexes fell, the Nasdaq 100 added 0.21%, a split from the broader Nasdaq Composite that shows strength concentrated in the largest technology names. The Russell 2000 gained 0.25%, showing small-cap stocks finding some support despite the prospect of rates staying higher for longer. Trading volume totaled 13.14 billion shares, below the 14.89 billion average of the last 20 sessions.
Markets will close Monday for the Labor Day holiday. Detrick said next week's consumer and producer price reports would bring more clarity on inflation.
Sources: Investing.com, InvestingLive
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