Weekly Recap: Jobs Report Sends Stocks Lower as Fed Rate Hike Odds Rise to 58% in September

TLDR

• U.S. stocks fell Friday after a stronger-than-expected August jobs report raised fears of a Fed rate hike
• The economy added 162,000 jobs in August, more than double the 55,000 economists expected
• Odds of a September Fed rate hike jumped to 58% after the report, up from 49% Thursday
• Chip stocks bucked the trend, with the PHLX Semiconductor Index rising 3.4%
• Lululemon shares dropped 17% after the company cut its revenue and profit guidance

A blowout jobs report sent stocks lower on Friday, as investors rushed to reprice the odds of a Federal Reserve interest rate hike this month.

The Dow Jones Industrial Average fell 272 points, or 0.5%. The S&P 500 dropped 0.4% and the Nasdaq Composite slipped 0.3%. The declines came a day after both the Dow and the S&P 500 posted their best single-day gains in nearly a month.

The August nonfarm payrolls report showed the U.S. economy added 162,000 jobs last month. That was more than double the 55,000 jobs economists had forecast.

The strong number caught Wall Street off guard. Earlier this week, other labor market data had pointed to slow but steady job growth, not a blowout.

Fed Rate Hike Odds Jump After Jobs Report

Following the report, traders moved quickly to price in a higher chance of the Fed raising rates. According to the CME FedWatch tool, odds of a hike at the September 15-16 Federal Open Market Committee meeting rose to 58%. On Thursday, that figure stood at 49%.

The odds of a rate hike in 2 weeks have jumped back up to 58% 🚨 pic.twitter.com/g9CVoQD4zj

— Barchart (@Barchart) September 4, 2026

A tight labor market gives the Fed more room to raise rates without risking a sharp slowdown. Policymakers have said they want to see clear signs that the economy is cooling before they stop hiking.

With the jobs report now behind them, investors are turning their attention to inflation data. The August consumer price index reading is due out September 11, just days before the Fed meeting.

Chip Stocks Rise, Lululemon Tumbles

Not everything moved lower on Friday. Chip stocks stood out as a bright spot. The PHLX Semiconductor Index gained 3.4%, though it was not enough to lift the broader market.

Lululemon was the biggest decliner among individual stocks. Shares fell 17% after the athletic apparel company lowered its revenue and profit outlook. Second quarter revenue also came in below expectations.

No other major earnings reports were on the schedule for Friday.

The S&P 500 closed at 7,718, the Dow at 53,414, and the Nasdaq at 26,506.

Next week’s inflation report will be closely watched. If price pressures remain high, it could strengthen the case for the Fed to act at its September meeting.

Markets will be watching every data point between now and September 15 for any sign of how the Fed might move.

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