Concerns Behind the Employment Surprise in the U.S. Stock Market

On the 4th (local time), New York stocks closed lower as concerns about further rate hikes by the Federal Reserve resurfaced following stronger-than-expected August employment data. The S&P 500 fell 0.4% to 7718.60, the Dow Jones Industrial Average lost 0.5% to 53414.25, and the Nasdaq Composite declined 0.3% to 26506.99. Meanwhile, the Russell 2000 rose 0.2%, partly offsetting the declines.

According to the U.S. Department of Labor, nonfarm payrolls increased by 162,000 in August, well above market expectations of 65,000, while the unemployment rate held steady at 4.1%. Following the release of this report, the probability of a 25-basis-point rate hike at the Federal Open Market Committee meeting on September 15–16 rose to around 60%, and the yield on the two-year U.S. Treasury note climbed to 4.37%, lifting short-term rate expectations. Investors now view the Consumer Price Index (CPI), due on September 11, as the final variable in the Fed’s decision.

By sector, shares of some semiconductor companies, including NVIDIA and AMD, rose between 0.8% and 4.7%, partly offsetting the broader weakness in growth stocks. Conversely, Lululemon Athletica plunged 17.4% after its quarterly revenue missed expectations and it lowered its full-year guidance again, highlighting the earnings risk for overvalued consumer names. Large technology stocks sensitive to long-term growth expectations—such as Apple, Tesla, and Netflix—were generally weaker amid renewed concerns over rising interest rates.

Global factors added to the pressure. As the conflict between the U.S. and Iran intensified and the Strait of Hormuz remained blocked, Brent crude rose to $96.28 a barrel and WTI climbed to $91.48, marking roughly a 9% increase over the week. At the same time, the average price of diesel in the U.S. hit a record high of $5.85 per gallon, pushing up logistics costs and adding to future inflation pressures. The growing risk of energy-driven inflation has reinforced the view that the Fed will find it hard to ease its tightening measures, weighing on overall investor sentiment today.