Stocks Slide as Strong Jobs Report Fuels Rate Hike Bets

Stocks fell on Friday after a surprisingly strong jobs report raised prospects of an interest rate hike by the Federal Reserve. The S&P 500 dropped 0.4%, while the Dow Jones Industrial Average declined 0.5% and the Nasdaq composite lost 0.3%. The Labor Department reported that employers added 162,000 jobs in August, exceeding forecasts.

The stronger-than-expected hiring could give the central bank's policymakers more leeway to raise interest rates at their next policy meeting on September 16. Fed Chair Kevin Warsh said last week that inflation had not shown sufficient improvement and may require further action from the central bank. However, Federal Reserve governor Christopher Waller suggested that a rate hike would depend on new data showing cooling inflation.

The jobs report also led to increased expectations for a rate hike in September, with CME FedWatch reporting 60.4% probability, up from 49.4% the previous day and 57% a week ago. The government will release August inflation figures on September 11, which could further influence the central bank's decision.

U.S. Treasury yields rose after the jobs report, with the yield on the 10-year Treasury increasing to 4.78% from 4.77%. The yield on the 2-year Treasury also rose to 4.37% from 4.34%. Oil prices continued their upward trend, with Brent crude rising 0.8% to settle at $96.28 a barrel.