August payrolls nearly triple forecasts; all three major indexes decline

Odds of September rate hike climb to 58%, market focus shifts to CPI

The New York Stock Exchange, seen in a file photo from May. [Yonhap]
The New York Stock Exchange, seen in a file photo from May. [Yonhap]

All three major US stock indexes fell Friday after a stronger-than-expected jobs report stoked fears that the Federal Reserve could raise interest rates again, dampening investor sentiment.

The Dow Jones Industrial Average closed down 271.86 points, or 0.51 percent, at 53,414.25. The S&P 500 fell 0.38 percent to 7,718.6, while the NASDAQ Composite dropped 0.29 percent to 26,506.99.

The US Department of Labor reported that nonfarm payrolls rose by 162,000 in August from the previous month — the largest monthly gain in five months and nearly three times what analysts had forecast.

The blowout reading raised the likelihood of a rate hike at this month's Federal Open Market Committee meeting. According to the CME FedWatch tool, fed funds futures markets priced in a 58.4 percent probability of a September rate increase, up 9.0 percentage points from Friday.

Bond yields also jumped. The yield on the policy-sensitive 2-year Treasury note rose 4.7 basis points to 4.379 percent, while the 10-year yield climbed 2.2 basis points to 4.783 percent. The dollar index gained 0.21 percent to 99.17. Bitcoin briefly slid to the $78,000 range amid risk-off sentiment.

President Donald Trump kept up his pressure on the Fed to cut rates, arguing that US interest rates should be at 1 percent or 0.5 percent.

Oil prices rose on heightened geopolitical tensions in the Middle East. Clashes between Yemeni government forces and rebels in the Bab el-Mandeb Strait fueled supply disruption fears, pushing November Brent crude up 0.8 percent to $96.28 a barrel, while October West Texas Intermediate gained 0.2 percent to $91.48.

Market attention now turns to the US August consumer price index. With the jobs data reviving rate-hike expectations, inflation trends are seen as a key variable that could determine the Fed's next monetary policy move.


jookapooka@heraldcorp.com