U.S. stocks retreated on Friday, September 4, after the Bureau of Labor Statistics reported that the economy added far more jobs in August than economists had expected. The stronger-than-forecast payrolls report revived bets that Federal Reserve Chair Kevin Warsh will push for a rate hike at the September 15-16 meeting, sending Treasury yields higher and pressuring equities. Gold slid alongside a firmer dollar, oil extended its advance on lingering Middle East tensions, and a sharp earnings-driven drop in Lululemon added to the day’s downbeat tone in consumer names.

August Payrolls Nearly Triple Forecasts

Nonfarm payrolls rose by 162,000 in August, blowing past the consensus estimate of roughly 55,000 and marking one of the largest upside surprises of the year. The unemployment rate held steady at 4.1%, in line with expectations, while average hourly earnings rose 0.3% to $37.75, up 3.1% from a year earlier. Gains were concentrated in food services and drinking places, which added 59,000 jobs, and local government education, up 42,000, while information employment declined by 23,000. The Bureau of Labor Statistics also revised June and July payrolls up by a combined 55,000, reinforcing the picture of a resilient labor market as the Fed weighs its next move on rates.

Rate-Hike Odds Climb Under Warsh’s Fed

The report reinforced the hawkish signal Fed Chair Kevin Warsh sent at Jackson Hole the previous week, when he said the labor market looked “consistent with full employment” and flagged persistent inflation pressures. Fed funds futures pushed the implied probability of a quarter-point hike at the September meeting to around 58%, up from roughly 49% a day earlier. The two-year Treasury yield, most sensitive to near-term policy expectations, climbed toward 4.38% as traders repriced the path for interest rates higher into year-end, a sharp reversal from the rate-cut expectations that had prevailed through much of the summer.

Wall Street Retreats as Yields Rise

All three major indexes closed lower. The S&P 500 fell 0.38% to 7,718.60, the Dow Jones Industrial Average dropped 0.51%, or 271.86 points, to 53,414.25, and the Nasdaq Composite slipped 0.29% to 26,506.99. Losses were led by consumer and old-economy names, with Lululemon plunging more than 17% after cutting its revenue and profit outlook and Tesla falling nearly 6% following a National Highway Traffic Safety Administration safety review. Chipmakers offered some support, with Intel and Nvidia both edging higher on the session, underscoring how the selloff stayed concentrated in rate-sensitive and consumer-facing shares rather than spreading evenly across the market.

Gold Slides as Oil Extends Its Advance

Gold fell sharply as the stronger jobs data lifted the dollar and Treasury yields, with December futures dropping 1.39%, or $63.30, to settle at $4,476.60 an ounce. Higher rates raise the opportunity cost of holding non-yielding bullion, and the report gave the Fed less reason to ease policy. Oil moved the other way, with Brent crude settling near $92.68 a barrel, up 0.8%, and West Texas Intermediate finishing at $91.48, up 0.2%, as ongoing tensions in the Middle East kept a floor under prices heading into the weekend.

Daily market analysis by BCM Markets.