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.
The S&P 500 fell 0.5% in morning trading. The Dow Jones Industrial Average was down 378 points, or 0.7%, as of 11:08
a.m. Eastern time. The Nasdaq composite fell 0.4%.
Gains in technology stocks helped limit declines in other sectors. Nvidia rose 1.9%, Micron Technology gained 4.3% and Sandisk climbed 8.7%.
Lululemon Athletica sank 19.1% 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, held steady at 4.77%. 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 4.37% from 4.34% late Thursday. 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%.
A 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.
Expectations for a rate hike in September increased to 60.2% 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.
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.
Oil prices initially eased Friday, although they remain elevated following sharp increases earlier this 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, fell 0.6% to $94.92 a barrel. Benchmark U.S. crude was down 0.8% to $90.62 a barrel. For the week, they are up 7.7% and 8.8%, 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.
