US stocks fell on Friday after stronger-than-expected employment data increased expectations that the Federal Reserve could raise interest rates at its September meeting.
The Dow Jones Industrial Average dropped 271.86 points, or 0.51%, to 53,414.25. The S&P 500 fell 0.38% to 7,718.60, while the Nasdaq Composite declined 0.29% to 26,506.99.
US nonfarm payrolls increased by 162,000 in August, well above expectations for 53,000, while the unemployment rate held steady at 4.1%. Employment figures for June and July were also revised higher.
Treasury yields rose following the report, with the two-year yield reaching its highest level since January 2025. Markets increased the probability of a 25-basis-point Fed rate rise this month to 58%, from 49.4% a day earlier.
Attention now shifts to upcoming US inflation data, which could determine whether the Fed acts at its September 15–16 meeting. Fed Chairman Kevin Warsh adopted a hawkish stance at Jackson Hole, while Governor Christopher Waller last week indicated he could support keeping rates unchanged if inflation continues to moderate.
Despite Friday’s decline, the S&P 500 gained 0.1% for the week and the Nasdaq advanced 0.4%, while the Dow slipped 0.3%.
Oil remained elevated, with Brent crude at US$96.28 a barrel after gaining almost 8% last week amid disruption to key Middle East supply routes.
Australian Market Outlook
Australian shares face a cautious start to the week as investors assess fresh military strikes between the US and Iran and the potential impact on oil prices and inflation.
S&P/ASX 200 futures were pointing to a broadly flat open at Friday’s close, down just one point, although that was before the latest escalation in the Iran war over the weekend.
Energy stocks could find support if crude prices extend their gains, while the broader market may face pressure from renewed inflation concerns and expectations for higher interest rates.
The combination of developments in the Iran war, oil prices and shifting US rate expectations is likely to remain the key focus for markets at the start of the week.
