U.S. stocks fell across the board on the 4th local time. As August hiring showed a much stronger improvement than the market expected, hopes for a Federal Reserve rate cut receded and caution over tightening resurfaced.
On the New York Stock Exchange, the Dow Jones Industrial Average closed at 53,414.25, down 271.86 points, or 0.51%, from the prior session.
The S&P 500 fell 29.11 points, or 0.38%, to 7,718.60. The Nasdaq composite also ended trading down 77.07 points, or 0.29%, at 26,506.99.
According to the employment report released by the Labor Department, U.S. nonfarm payrolls increased by 162,000 last month. It was the biggest gain in five months and far exceeded market expectations.
Stronger-than-expected hiring was taken as a sign the U.S. economy remains solid. At the same time, market caution grew over the possibility that the Federal Reserve could raise rates at this month's Federal Open Market Committee (FOMC) meeting.
Yields rose in the bond market as well. As of 3 p.m. Eastern, the 2-year Treasury yield was 4.379%, up 4.7 basis points (1 bp = 0.01 percentage point) from the prior session. The 10-year yield rose 2.2 basis points to 4.783%.
According to CME FedWatch, the probability of a rate hike in September implied by federal funds futures was 58.4%. That was up 9 percentage points from the previous day.
Pressure from U.S. President Donald Trump on the Fed also continued. Trump wrote on Truth Social that if the Fed does not lower rates, the United States could halt trade with countries running a trade surplus with it. He later told reporters U.S. rates should be at 1% or 0.5%.
The dollar also strengthened. The dollar index, which measures the dollar against six major currencies, rose 0.21% to 99.17 from the previous session.
Risk assets also weakened after the jobs data. Bitcoin, which had topped $80,000, slid to the $78,000 range intraday, and selling appeared across cryptocurrencies.
International oil prices rose on concerns over supply disruptions from geopolitical tensions in the Middle East. Clashes between Yemeni government forces and rebels in the Bab el-Mandeb Strait, which links the Red Sea and the Gulf of Aden, heightened anxiety over crude supply.
Brent crude for November delivery settled at $96.28 a barrel, up 0.80% from the prior session. West Texas Intermediate (WTI) for October delivery rose 0.20% to $91.48.
The market is focused on the August consumer price index (CPI) due next week. With the unexpected strength in hiring adding uncertainty to the Fed's rate decision, the inflation trend is expected to become a key gauge for setting the course of future monetary policy.