Wall Street ends lower as robust US jobs data raises odds of Fed hike

NEW YORK — Wall Street dipped Friday as a robust jobs report raised the probability that the U.S. Federal Reserve will raise its key interest rate this month.

All three major U.S. indexes closed lower amid a broad selloff ahead of the three-day holiday weekend.

The Dow Jones Industrial Average fell 272.51 points, or 0.51%, to 53,413.60, the S&P 500 dropped 29.30 points, or 0.38%, to 7,718.41 and the Nasdaq Composite lost 77.07 points, or 0.29%, to 26,506.99.

For the week, the indexes were essentially unchanged.

The Labor Department's August employment report showed the U.S. economy added 162,000 jobs last month, nearly three times the 56,000 consensus, while the department revised June and July payrolls upward by a total of 55,000 jobs. Labor market participation increased while the unemployment rate held firm at 4.1%.

While a stronger-than-expected jobs report generally would be good economic news, markets interpret it as a sign the data-dependent Fed will implement a rate hike at this month's policy meeting to curb war-related energy price pressures from morphing into broader, more systemic inflation.

"The labor market had a nice snapback last month, and it's hard not to think an improving labor market is not a positive development for the economy," said Ryan Detrick, chief market strategist at Carson Group in Omaha, Nebraska. "On the flip side, the odds of a Fed hike increased a little bit as the economy continues to run a little on the hot side."

"We'll get a lot more clarity on inflation next week at the consumer and producer levels," he added.

Financial markets price in a 58.4% likelihood of a 25-basis-point rate hike at the conclusion of the Fed's September meeting, up from 49.4% Thursday, according to CME's FedWatch tool.

Among the 11 major S&P 500 sectors, consumer discretionary stocks were down the most, while industrials and tech showed modest gains.

Semiconductors gained 3.4% but remain down 17.8% this quarter. Software and services, which gained 24% over the same period, dropped 2.1% for the day.

Lululemon Athletica tumbled 17.4% after the activewear brand cut its full-year profit and revenue forecasts.

Adobe dropped 6.7% after it said longtime CEO Shantanu Narayen will be succeeded by insider Anil Chakravarthy.

U.S. credit reporting agencies lost ground after Federal Housing Finance Agency Director Bill Pulte said Thursday he directed Fannie Mae and Freddie Mac, created by Congress to support the housing market, to approve all lenders to use the credit scoring system VantageScore.

Fair Isaac lost 16.7%, TransUnion dropped 5.9%, while Equifax slid 6.4%.

U.S. markets will be closed Monday for the Labor Day holiday.

— reuters