Jobs Report Spooks Markets, Rate Hike Expectations Soar

US stocks ended lower on Friday after a stronger-than-expected jobs report, which has increased expectations of a Federal Reserve interest rate hike later this month.

The Labor Department reported that employers added 162,000 jobs in August, exceeding the forecasted 65,000. The unemployment rate held steady at 4.1 percent.

Wall Street expects the Fed to raise interest rates to combat inflation, which has been running above 3 percent due to rising oil prices amid the US war with Iran. The surprise increase in hiring could give the central bank's policymakers more leeway to raise the benchmark short-term interest rate at their next policy meeting on September 16.

According to CME FedWatch, expectations for a rate hike increased to 60.4 percent following the release of the jobs report, up from 49.4 percent on Thursday and 57 percent a week ago.