Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., Aug. 24, 2026.
Brendan McDermid | Reuters
The Dow Jones Industrial Average fell on Friday as August’s hotter-than-expected payrolls reading increased expectations that the Federal Reserve could raise interest rates at its next meeting.
The 30-stock Dow was down 382 points, or 0.7%. The S&P 500 slid 0.5%, while the Nasdaq Composite shed 0.4%.
Nonfarm payrolls grew 162,000 last month, much more than the 53,000 that economists polled by Dow Jones expected. The unemployment rate held steady at 4.1%, as expected. On top of last month’s gain, figures for both June and July saw upward revisions.
Treasury yields rose following the report, with the 2-year yield hitting its highest level since January 2025. Expectations that the Fed could hike rates in a couple weeks increased, as fed funds futures traders are now pricing in a 58% chance of a hike, per the CME FedWatch tool. Odds were at 49.4% a day ago.
“A monster jobs report for August reminds us that this labor statistic has become highly volatile while nudging up the probability of a September hike slightly,” said Bradford Smith, portfolio manager at Janus Henderson Investors.
Now, the debate surrounding the Fed “will sit handily on the incoming inflation data,” he added. “After a hawkish appearance from Chairman Warsh at Jackson Hole last week, there is a clear bias at the Fed to take action if the incoming data does not show further progress on disinflation.”
The three major averages rose on Thursday, catching a tailwind as Treasury yields pulled back after Federal Reserve Governor Christopher Waller said he would be “inclined to support” keeping rates at their current target range of 3.5% to 3.75% at the central bank’s Sept. 15-16 meeting.
However, the Dow is still heading for a drop of 0.5% this week. The S&P 500 is roughly flat on the week, while the Nasdaq is on pace for a 0.3% gain.