S&P 500 and Dow futures fell Friday after a hotter-than-expected August jobs report pushed traders to raise bets on a Federal Reserve rate hike this month. The surprise strength in hiring reversed part of Thursday's rally, which had been driven by dovish comments from Fed Governor Christopher Waller, and sent Treasury yields higher.
Jobs data reverses rate-cut hopes
The Labor Department said the U.S. economy added 162,000 jobs in August, far more than the 56,000 economists polled by Reuters had expected, while the unemployment rate held at 4.1%, in line with forecasts. The surprise strength pushed traders to raise the odds of a rate hike at the Federal Reserve's Sept. 15-16 meeting. Short-term interest-rate futures now imply a 65% chance of an increase, up from 55% before the report.
At 8:45 a.m. ET, Dow E-minis were down 156 points, or 0.29%, S&P 500 E-minis fell 15.75 points, or 0.2%, and Nasdaq 100 E-minis edged up 29 points, or 0.09%.
The report reverses ground gained a day earlier. Fed Governor Christopher Waller said Thursday that if incoming data confirms disinflation, he would favor keeping interest rates unchanged at the Sept. 15-16 policy meeting. Those comments helped the S&P 500 climb 1.06% and the Nasdaq surge 1.4% in Thursday's regular session.
Yields climb as Fed bets shift
Treasury yields rose alongside the shift in rate expectations. The 10-year Treasury yield rose to 4.802%, a gain of less than four basis points. The more policy-sensitive two-year yield climbed more than seven basis points to 4.425%, its highest level since January 2025. The CME Group's FedWatch tool showed the probability of a quarter-point hike at 58%, about nine percentage points higher than a day earlier.
The debate over September's seasonal weakness also lingers. Historically, September is the weakest month for stocks, with returns in the second half of the month averaging worse than 1%, according to Melissa Brown, global head of investment decision research at SimCorp. Investors will get a fuller read on the inflation picture when the Labor Department releases CPI and PPI data next week.
Sources: Economy News, All News, US Top News and Analysis
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