Stocks Fall as Jobs Fuel Bets Fed Will Raise Rates: Markets Wrap

(Bloomberg) — A stronger-than-anticipated increase in US jobs drove stocks and short-dated bonds lower, with traders boosting their bets the Federal Reserve will raise rates this month.

While analysts expect the September Fed decision to hinge on next week’s inflation data, swap contracts priced in an over 50% chance of a hike. The S&P 500 halted back-to-back gains. Treasury two-year yields, which are more sensitive to imminent policy moves, climbed as many as eight basis points before paring the advance. US markets will close Monday for a holiday.

Nonfarm payrolls climbed 162,000 last month, July’s job losses were revised away and the unemployment rate held steady. The surprise jump in hiring bolstered the case for the Fed to raise rates — but that’s not guaranteed. The report didn’t suggest the labor market is adding to price pressures.

The August jobs print was a step in the right direction, even if traders interpret it through a “good news is bad news” lens, according to Bret Kenwell at eToro.

“Regardless of how investors view the labor market, the Fed considers it broadly consistent with full employment, and today’s report will likely reinforce that view,” he said. “In the Fed’s eyes, the labor market is holding up, which means inflation remains the bigger problem.”

Read: Bessent Sees Oil as Low as $40 Post-Iran War, Taking Yields Down

President Donald Trump intensified pressure on the Fed to lower rates, threatening to cut off trade with certain economies with which the US has a deficit if the central bank doesn’t act.

“We just got GREAT Numbers on Jobs, the Market should go UP, because our Credit and Economy are better but, as always, for the past 25 years, the Stock Market goes DOWN, because we’re living under False Reality that if things are good, you’ve got to ‘KILL IT’ because of a ‘fear’ of Inflation,” he said on social media.

Trump later Friday rejected the idea that a Fed hike would reassure bond markets worried about debt and inflation, saying the US should be at a 1% rate or lower.

The upside surprise in payrolls will likely ramp up concerns about a hike, but that outcome is in the hands of next week’s inflation numbers, according to Ellen Zentner at Morgan Stanley Wealth Management. If they come in cooler than expected, the Fed will probably feel comfortable discounting potentially inflationary signals coming out of the labor market, she added.

However, payroll strength could tip the decision if the upcoming inflation data breaks right on the cusp of the “hold/hike divide”, said Krishna Guha at Evercore.

Corporate Highlights:

Lululemon Athletica Inc. lowered its full-year outlook for a second straight quarter, reflecting the deepening challenges incoming Chief Executive Officer Heidi O’Neill will face when she takes over the top job next week. Adobe Inc. named Anil Chakravarthy, the leader of its marketing and analytics software business, as its next chief executive officer, thrusting the company veteran into a challenging competition with AI upstarts. DeepSeek plans to deploy at least 160,000 of Huawei Technologies Co.’s top accelerators at a massive data center it’s building in Inner Mongolia, which could create one of the largest known clusters of Huawei AI chips and advance China’s efforts to replace Nvidia Corp. Moonshot AI is considering raising up to $5 billion in its planned Hong Kong initial public offering as soon as this year, people familiar with the matter said, as the Chinese AI firm taps into strong investor demand. Some of the main moves in markets:

Stocks

The S&P 500 fell 0.4% as of 4 p.m. New York time The Nasdaq 100 rose 0.2% The Dow Jones Industrial Average fell 0.5% The MSCI World Index fell 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.1% to $1.1614 The British pound was little changed at $1.3519 The Japanese yen fell 0.3% to 156.27 per dollar Cryptocurrencies

Bitcoin fell 2% to $79,857.57 Ether fell 1.9% to $2,457.62 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.78% Germany’s 10-year yield was little changed at 3.34% Britain’s 10-year yield was little changed at 5.13% The yield on 2-year Treasuries advanced four basis points to 4.37% The yield on 30-year Treasuries was little changed at 5.24% Commodities

West Texas Intermediate crude rose 0.1% to $91.41 a barrel Spot gold fell 0.9% to $4,432.58 an ounce ©2026 Bloomberg L.P.