Dow Jones Tumbles as Strong Job Numbers Boost Rate Hike Odds
The Dow Jones Industrial Average fell by 0.6% on Friday, reaching just shy of 53,400 after August's Nonfarm Payrolls (NFP) report was released. The report showed a gain of 162K jobs, exceeding the forecasted 56K and pushing the probability of a September interest rate hike above 60%. This marked a significant shift from Thursday's 600-point rally, which was largely driven by hopes that the Fed would hold off on raising rates.
The strong job numbers also led to an increase in the two-year Treasury yield, reaching its highest level since January 2025. The index is now trading at this move rather than the payroll count itself. As a result, the probability of a quarter-point hike in September increased to 60.4%, while October carries an 87% chance of at least one hike.
The president praised the job numbers and called on the Fed to be 'patriots', warning that if rates are not lowered, he will stop trading with countries running deficits with the US. This threat is significant, as the constituents of the index have supply chains in these countries. Apple, Nike, Walmart, Boeing, and Caterpillar are among those affected.
The Producer Price Index (PPI) and Consumer Price Index (CPI) will be released next week, which could further impact market expectations for a September rate hike. The Dow Jones is currently trading below its early-August record, with the 53,500 handle serving as the first hurdle.