Dow falls after August jobs report triples forecasts, boosts rate-hike bets

The Dow Jones Industrial Average fell Friday after August’s jobs report came in well above forecasts, pushing traders to raise their bets on a Federal Reserve rate hike later this month.

The Dow shed around 150 points, or 0.3%, with the S&P 500 also dipping 0.1%. The Nasdaq Composite bucked the trend, ticking up 0.1%.

The economy added 162,000 jobs in August, dwarfing the 53,000 forecast by economists surveyed by Dow Jones. The unemployment rate remained at 4.1%, and prior readings for both June and July were revised higher.

According to the CME FedWatch tool, the probability of a rate hike at the Fed’s Sept. 15–16 meeting has risen to 58%, up from 49.4% the previous day, as reflected in fed funds futures markets. The 2-year Treasury yield hit its highest level since January 2025 following the report.

“An upside surprise in payrolls will likely ramp up concerns about a rate hike, but that outcome is in the hands of next week’s inflation numbers,” Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, told CNBC. “If those come in cooler than expected, the Fed will likely feel comfortable discounting potentially inflationary signals coming out of the labor market.”

Despite Friday’s decline, the Dow is set to close the week little changed. The S&P 500 looks poised to finish the period up about 0.4%, and the Nasdaq appears headed for a gain of roughly 0.8%.

Markets painted a contrasting picture on Thursday, with all three major indexes closing higher after Federal Reserve Governor Christopher Waller indicated he would be “inclined” to support holding rates at their current target range of 3.5% to 3.75% at the September meeting. The Dow posted its best single-day gain since Aug. 4, according to CNBC.

In commodities, diesel reached a record $5.85 a gallon on Friday, topping the previous peak from 2022, according to The Wall Street Journal. Brent crude was trading near $94 a barrel.