Market Reaction to Jobs Data
U.S. stocks mostly declined on Friday after the Labor Department reported that employers added 162,000 jobs last month, far exceeding the 65,000 forecasters had expected. The S&P 500 slipped 0.1% in morning trading, while the Dow Jones Industrial Average fell 211 points, or 0.4%. The Nasdaq composite edged up 0.1%, helped by gains in technology stocks such as Nvidia, Micron Technology, and Sandisk, which rose 2.5%, 4.1%, and 6.1%, respectively.[S1]
The unemployment rate held steady at 4.1%, and revisions added 55,000 to June and July payrolls. The stronger hiring data increased expectations that the Federal Reserve will raise its benchmark interest rate when policymakers meet later this month. According to CME FedWatch, the probability of a September rate hike rose to 60.2% on Friday, up from 49.4% on Thursday and 57% a week ago.[S1]
Bond Yields and Fed Outlook
Treasury bond yields mostly rose, with the 10-year yield holding steady at 4.77%, while the 2-year yield, which closely tracks Fed rate expectations, increased to 4.37% from 4.34% late Thursday. Both yields remain significantly higher than at the start of 2026, when the 10-year was as low as 4.20% and the 2-year as low as 3.50%.[S1]
Market participants anticipate that the Federal Reserve will increase interest rates before the end of the year to combat inflation, which is currently above 3% due to higher oil prices linked to the conflict with Iran. The Fed's target is 2% inflation. On Thursday, Governor Christopher Waller indicated that if upcoming data shows cooling inflation, he would favor holding rates steady, but stronger inflation might lead to a rate increase.[S1]
Energy Prices and Corporate News
Oil prices dipped on Friday but remained significantly higher for the week. U.S. crude fell 2.6% to $88.96 per barrel, while Brent dropped 2.2% to $93.44, yet both are up 8% to 9% for the week. The six-month conflict with Iran has disrupted fuel supplies, with the Strait of Hormuz effectively closed. Diesel reached a record $5.85 per gallon on Friday. AAA noted that U.S. gasoline prices this weekend will be the highest ever for this time of year.[S1]
In corporate developments, Lululemon Athletica dropped 17.1% after its quarterly results missed analyst expectations and it again reduced its full-year forecast. European and Asian markets showed mixed performance. The conflict escalated this week, with Iran firing at Kuwait on Thursday in response to U.S. strikes earlier in the week.[S1]
