So, the question everyone on Wall Street is now asking is: What does that mean for the Federal Reserve, which will meet mid-month (Sept. 15 to 16) to discuss monetary policy and decide whether to change its current target interest rate? <\/p>\n
Both futures traders and bond investors see a rate hike as more likely <\/p>\n
The futures market now assigns a 59.4% probability that the Fed will raise its target rate by a quarter percentage point at the upcoming meeting. That’s up from 49.4% before the jobs report came out. Futures traders see a 44% chance that the Fed will increase that rate again by year’s end. <\/p>\n
Two-year Treasury yields, which are most sensitive to expected Fed policy, also climbed in response to the jobs report, indicating that, like the futures market, the bond market<\/a> expects the U.S. central bank to hike rates. <\/p>\n That could be a headwind for stocks, as they tend to perform worse when the Fed is hiking rates (though rate hikes affect sectors in different ways and to varying degrees, of course). That’s because higher rates mean increased interest costs for businesses, eroding their bottom lines. It also means higher borrowing costs for consumers, and that could put a dent in consumer spending, which accounts for about two-thirds of GDP. <\/p>\n And indeed, the stock market reacted negatively to the jobs report on Friday, with the S&P 500 index down about 0.4% as investors assumed that the unexpected strength in the labor market means the Fed can worry less about its mandate for maximum employment (which often requires rate cuts) and can instead focus on bringing down elevated inflation<\/a> (which requires rate hikes). Put more simply, the thinking on Wall Street is that the Fed can comfortably hike rates in September and succeeding months without worrying about damaging the labor market. <\/p>\n All that said, we’re in a more complicated rate environment right now, and the Fed is not the only driver of interest rates. Bond investors, unhappy with rising U.S. government debt (it just exceeded $40 trillion) and elevated inflation, have been selling long-maturity Treasury bonds in recent months, sending yields — which move in the opposite direction of prices — higher. And many borrowing rates, including mortgage and car loans, are based on those yields. <\/p>\n And when bond yields rise, bonds become more attractive to investors relative to risk assets like stocks, which can also negatively impact stock indexes. <\/p>\n So, moving forward, investors will need to monitor both the Fed and bond yields to gauge what the future holds for stocks. <\/p>\n Don’t miss this second chance at a potentially lucrative opportunity <\/p>\n Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this. <\/p>\n On rare occasions, our expert team of analysts issues a “Double Down” stock<\/a> recommendation\u00a0for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves: <\/p>\n Nvidia:\u00a0if you invested $1,000 when we doubled down in 2009,\u00a0you’d have $598,219!* <\/p>\n Apple: if you invested $1,000 when we doubled down in 2008, you’d have $61,037!* <\/p>\n Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $421,997!* <\/p>\n Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you join\u00a0Stock Advisor, and there may not be another chance like this anytime soon. <\/p>\n See the 3 stocks \u00bb<\/a> <\/p>\n *Stock Advisor returns as of August 3, 2026 <\/p>\n Matthew Benjamin<\/a> has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy<\/a>. <\/p>\n<\/a> Image source: Getty Images. <\/p>\n