Wall Street falls despite impressive US jobs data

Wall Street ended lower on Friday even after US employment data delivered a much stronger performance than analysts expected. Investors treated the report as a reason for the Federal Reserve to keep tightening policy rather than as an unqualified sign of economic strength.

The Labor Department said the US economy added 162,000 jobs in August, nearly three times the 56,000 analysts had forecast. Payroll figures for June and July were revised upward by a combined 55,000 jobs. Labor-force participation increased, while unemployment remained at 4.1%.

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The labor market had a dynamic recovery last month, and it is difficult not to see this improvement as positive for the economy.

Ryan Detrick, chief market strategist at Carson Group in Omaha, said the labor market had made a strong recovery. But he also noted that the improved figures increased the likelihood of a Fed rate hike because the economy continued to move at a rapid pace. Markets are watching whether energy prices linked to the war will create broader inflationary pressure.

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On the other hand, the odds of a Fed rate hike increased, as the economy continues to move at a rapid pace.

CME’s FedWatch tool put the probability of a 25-basis-point increase at the September meeting at 58.4%, up from 49.4% on Thursday. Detrick said inflation data due the following week, including consumer and producer price figures, would provide more clarity.

The S&P 500 fell 0.38% to 7,718.13, the Nasdaq Composite dropped 0.30% to 26,505.44 and the Dow Jones Industrial Average declined 0.54% to 53,398.15. Semiconductor stocks gained, although they remained down about 18% for the quarter. Software and services shares fell after gaining roughly 25% over the same period. Lululemon Athletica also declined after lowering its forecasts.

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We will have more clarity on inflation next week, with the consumer and producer price data from the Labor Department.