U.S. stocks ended lower on Friday as investors assessed the latest employment data and its implications for future Federal Reserve policy. The S&P 500 lost 0.3% after reaching an all-time high the previous day, while the Dow Jones Industrial Average fell by 220 points, or 0.5%. The Nasdaq composite slipped by less than 0.1%.
Bond markets saw more significant movement, with Treasury yields falling after a Labor Department report showed that U.S. employers hired fewer workers in August than economists had anticipated. The government also revised down hiring estimates for June and July by a combined 21,000 jobs.
Recent labor market data has been weaker than expected, and traders are now fully pricing in a rate cut from the Federal Reserve at its next meeting on September 17, according to CME Group data (https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html). Rate cuts are typically seen as supportive for economic growth but can also increase inflationary pressures.
So far this year, the Federal Reserve has prioritized concerns about inflation—especially due to President Donald Trump’s tariffs—over weakness in the job market. However, Friday’s employment figures may prompt consideration of a larger-than-usual rate cut at the upcoming meeting.
“This week has been a story of a slowing labor market, and today’s data was the exclamation point,” said Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.
Rick Rieder, chief investment officer of global fixed income at BlackRock, noted that health care hiring had previously supported job growth but is now showing signs of decline: “but with it now showing some tangible signs of decline, the foundation underneath the labor market seems to be cracking.”
Despite disappointing jobs numbers, analysts say there is not yet clear evidence of an imminent recession and that U.S. economic growth continues. Investors remain concerned about whether conditions will allow interest rates to fall without tipping the economy into contraction.
Market volatility on Friday reflected these uncertainties as Wall Street tries to balance expectations for lower rates with hopes for continued economic expansion.
Among individual stocks, Nvidia dropped 2.7% amid scrutiny over its valuation following rapid gains tied to artificial intelligence investments. Lululemon shares declined 18.6% after reporting quarterly revenue below analyst forecasts; CEO Calvin McDonald cited weak U.S. performance and CFO Meghan Frank pointed to “industrywide challenges, including higher tariff rates.”
Broadcom rose 9.4% after exceeding profit and revenue expectations for its most recent quarter; CEO Hock Tan reported strong customer investment in AI chips.
Tesla shares gained 3.6% following news of a proposed compensation package for CEO Elon Musk that could reach $1 trillion if aggressive targets are met over ten years.
Smith & Wesson Brands advanced 6.5% after reporting better-than-expected quarterly results; CEO Mark Smith said demand was strong even during what is usually a slow season for firearms sales.
The S&P 500 closed at 6,481.50; the Dow Jones Industrial Average finished at 45,400.86; and the Nasdaq composite ended at 21,700.39.
Internationally, European indexes followed Wall Street lower despite earlier gains while Asian markets mostly advanced: Japan’s Nikkei rallied on earnings growth data and Chinese indexes rebounded more than 1% after recent declines.
The yield on the benchmark 10-year Treasury note fell sharply from earlier in the week—a move that could signal potential declines in borrowing costs such as mortgage rates (https://fred.stlouisfed.org/series/MORTGAGE30US).
