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Financial Markets 09/04 15:30
Stocks fell on Wall Street and Treasury yields rose after a surprisingly
strong report on the job market appeared to increase chances that the U.S.
central bank could raise interest rates later this month. The S&P 500 lost 0.4%
Friday. The Dow Jones Industrial Average fell 0.5%, and the Nasdaq composite
gave back 0.3%. The government reported that U.S. employers added 162,000 jobs
to their payrolls last month, far more than expected. That could give the
Federal Reserve leeway to raise its benchmark short-term interest rate to fight
inflation. The yield on the 2-year Treasury climbed to 4.37%.
THIS IS A BREAKING NEWS UPDATE. AP's earlier story follows below.
U.S. stocks fell and Treasury bond yields mostly rose Friday after the
government reported that employers unexpectedly added 162,000 jobs last month.
The surprise increase in hiring could give the Federal Reserve leeway to
raise its benchmark short-term interest rate to fight inflation when central
bank policymakers meet later this month.
"Today's jobs report does lean toward the Fed increasing rates," said Terry
Sandven, chief equity strategist at U.S. Bank Asset Management Group, noting,
however, that a rate hike is "not a foregone conclusion."
The S&P 500 fell 0.4%. The Dow Jones Industrial Average was down 291 points,
or 0.5%, as of 3:28 p.m. Eastern time. The Nasdaq composite fell 0.3%.
Gains in technology stocks helped limit declines in other sectors. Nvidia
rose 0.6%, Advanced Micro Devices added 3.4%, Sandisk jumped 10.2% and Micron
Technology gained 4.7%.
Lululemon Athletica sank 17.6% after the retailer reported quarterly revenue
that fell short of analysts' estimates and lowered its fiscal full-year outlook
again.
Markets were mixed in Europe and Asia.
U.S. government bond yields, which had eased the last couple of days, mostly
rose.
The yield on the 10-year Treasury, which influences mortgage rates, rose to
4.78% from 4.77% late Thursday. It has been rising steadily throughout the year
and was as low as 4.20% at the beginning of 2026.
The yield on the 2-year Treasury, which closely tracks expectations for
Federal Reserve moves on interest rates, rose to 4.38% from 4.34%. It remains
significantly higher for the year, though, and was as low as 3.50% at the
beginning of 2026.
Wall Street expects the central bank to raise interest rates before the year
ends in an effort to cool inflation, which has been running hot due to rising
oil prices amid the U.S. war with Iran and remains well above 3%. The Fed has a
stated goal of cooling inflation to a target of 2%.
The Labor Department reported that hiring in August far exceeded the 65,000
forecasters had expected, according to a poll by FactSet. Labor Department
revisions also looked good, adding 55,000 to June and July payrolls. The
unemployment rate held steady at 4.1%.
The stronger jobs market could make matters more complicated for the Fed,
which has to balance supporting job growth with fighting inflation. Raising
interest rates can help tame inflation by slowing economic growth.
"Given the strength of the payroll report, a rate hike on Sept. 16 appears
increasingly likely," according to Jeffrey Roach, chief economist for LPL
Financial. "Ironically, a rate hike may generate less market volatility than
another meeting in which policymakers choose to stand pat."
Expectations for a rate hike in September increased to 60.4% on Friday
following the release of the jobs report, up from 49.4% Thursday and from 57% a
week ago, according to CME FedWatch.
The government will release August inflation figures Sept. 11, shortly
before the Fed's policymaking committee's next meeting, which ends on Sept. 16.
The closely watched consumer price index, or CPI, which measures costs for
consumers, is expected to show that inflation rose last month at a 3.4% rate,
the same as in July. Inflation has held stubbornly above 3% for most of the
year.
"With the August CPI report now on deck, the question is whether the
combined impact of stronger-than-expected hiring and a stiff inflation tailwind
will push policymakers to the tipping point of raising rates later this month,"
said Jim Baird, chief investment officer with Plante Moran Financial Advisors.
Fed Chair Kevin Warsh said last week at the Fed's annual economic symposium
in Jackson Hole, Wyoming, that inflation had not shown sufficient improvement
and that the central bank might have "more work to do," a sign he is weighing a
rate increase at the Fed's next meeting.
On Thursday, Federal Reserve governor Christopher Waller said that if new
data next week shows inflation is cooling, he "would be inclined" to keep the
Fed's benchmark interest rate unchanged. Should the data show hotter inflation,
he would consider a rate hike.
Meanwhile, oil rose Friday, adding to a sharp run-up in prices earlier in
the week as the six-month long U.S. war with Iran intensified. Iran fired at
Kuwait on Thursday in retaliation for U.S. bombardments earlier in the week.
The Strait of Hormuz remains effectively closed.
The price of Brent crude, the international standard, rose 0.8% to settle at
$96.28 a barrel. Benchmark U.S. crude rose 0.2% to settle at $91.48 a barrel.
For the week, they are up 9.2% and 9.7%, respectively.
U.S. gasoline prices will be higher this weekend than they have ever been at
this time of year, according to AAA.
Diesel hit an all-time high for any time of the year on Friday, soaring to
an average of $5.85 a gallon. Because diesel is used for many freight and
delivery networks, higher diesel prices mean higher transportation costs for a
long list of everyday goods, a price shock that can impact prices for consumers.
U.S. stock markets will be closed Monday for the Labor Day holiday.
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