Stocks Settle Mostly Lower on Hawkish US Payroll Report

The S&P 500 Index ($SPX) (SPY) closed down by -0.38% on Friday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.51%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up by +0.21%.  E-mini S&P futures (ESU26) fell -0.44%, and September E-mini Nasdaq futures (NQU26) rose +0.10%.

Stocks settled mixed on Friday.  The broader market was under pressure after a stronger-than-expected US jobs report bolstered speculation that the Fed will be forced to raise interest rates this year.  August nonfarm payrolls rose much more than expected, and July payrolls were revised upward to show an increase, better than the original report of a decline.  The chance of a Fed rate hike at this month’s FOMC meeting jumped to 60% from 52% before the payroll report.

On the positive side for equities, chipmakers and AI-infrastructure stocks have strengthened, helping the Nasdaq 100 Index settle higher.

US Aug nonfarm payrolls rose +162,000, stronger than expectations of +55,000 and the largest increase in 5 months.  Also, July payrolls were revised upward to +21,000, stronger than the previously reported decline of -23,000.  The Aug unemployment rate remained unchanged at 4.1%, in line with expectations.

US Aug average hourly earnings rose +0.3% m/m and +3.1% y/y, right on expectations.

Oct WTI crude oil prices (CLV26) posted modest gains on Friday.  The upside in crude was limited Friday after Saudi Aramco kept the price of its Arab Light crude for October delivery to Asian customers unchanged, versus expectations of a $ 5-a-barrel increase. Crude prices rose to a 6-week high on Thursday amid signs of tighter global oil supplies.  Data compiled by Bloomberg, Kpler and Vortexa showed that Saudi Arabia's Aug crude exports dropped to about 3 million bpd, the lowest amount in 9 years. Also, hostilities have escalated this week between the US and Iran, dampening hopes that the Strait of Hormuz will be fully reopened anytime soon.   

Q2 earnings results are a bullish factor for stocks.  The S&P 500 is tracking for earnings growth of almost +32% in Q2, well above projections of +23%, and nearly four times the average earnings growth rate outside of the Covid period since Q4 of 2013, according to Bloomberg Intelligence.  AI spending is expected to account for most of earnings, with AI infrastructure stocks set to contribute nearly 60% of the S&P 500's earnings-per-share growth in Q2.  So far, earnings results have been positive, with 86% of the 495 S&P 500 companies that have reported Q2 earnings beating estimates, according to Bloomberg data. 

The markets are discounting a 60% chance of a +25 bp rate hike at the next FOMC meeting on September 15-16.

Overseas stock markets settled mixed on Friday.  The Euro Stoxx 50 closed up +0.16%.  China's Shanghai Composite fell to a 1-week low and closed down -0.30%.  Japan's Nikkei-225 Stock Average closed up +1.26%.

Interest Rates

December 10-year T-notes (ZNZ6) closed down by -6 ticks on Friday.  The 10-year T-note yield rose +1.4 bp to 4.782%.  T-notes moved lower on Friday after the stronger-than-expected US Aug payroll report boosted the chances of a Fed rate hike at the Sep 15-16 FOMC meeting to 60% from 52% before the report. 

Losses in T-notes were limited after Aug average hourly earnings rose as expected, showing wage pressures are contained.  T-notes also have carryover support from Thursday, when Fed Governor Christopher Waller said underlying inflation is better than core numbers suggest and he will support keeping interest rates steady at this month’s FOMC meeting if next week’s inflation news shows “continued progress toward our 2% goal.” 

European government bond yields moved lower on Friday.  The 10-year German bund yield fell -0.4 bp to 3.339%.  The 10-year UK gilt yield fell -0.1 bp to 5.133%.

Eurozone July retail sales unexpectedly fell by -0.6% m/m, weaker than expectations of +0.2% m/m and the biggest decline in two years.

German July factory orders rose +2.5% m/m, stronger than expectations of +0.3% m/m.

Markets are discounting a 100% chance of a +25 bp ECB rate hike at its next policy meeting on September 10.

US Stock Movers

Software stocks sold off on Friday, weighing on the broader market.  Autodesk (ADSK) closed down more than -8% to lead losers in the Nasdaq 100, and Adobe Systems (ADBE) closed down more than -6%.  Also, Thomson Reuters (TRI) and Workday (WDAY) closed down more than -5%, and Palantir Technologies (PLTR) closed down more than -4%.  In addition, ServiceNow (NOW) and Intuit (INTU) closed down more than -3%, and Microsoft (MSFT) and Atlassian Corp (TEAM) closed down more than -2%.

Credit reporting agencies fell on Friday after US Federal Housing Finance Agency Director Pulte renewed criticism of the credit bureaus for overcharging Americans.  Fair Isaac (FICO) closed down more than -16%.  Also, Equifax (EFX) closed down more than -6%, and TransUnion (TRU) closed down more than -5%. 

Cryptocurrency-exposed stocks were under pressure on Friday after Bitcoin (^BTCUSD) fell more than -2%.  Coinbase Global (COIN) closed down more than -4%, and MARA Holdings (MARA) closed down more than -2%.  Also, Circle Internet Group (CRCL), Strategy (MSTR) and Robinhood Markets (HOOD) closed down more than -1%. 

Chipmakers and AI-infrastructure stocks rallied on Friday, supporting gains in the Nasdaq 100. The iShares Semiconductor ETF (SOXX) closed up more than +3%.  SanDisk (SNDK) closed up more than +11% to lead gainers in the S&P 500 and Nasdaq 100, and KLA Corp (KLAC) and Marvel Technology (MRVL) closed up more than +7%.  Also, Seagate Technology Holdings Plc (STX) and Micron Technology (MU) closed up more than +6%, and Western Digital (WDC) and Lam Research (LRCX) closed up more than +5%.  In addition, Applied Materials (AMAT), Advanced Micro Devices (AMD), ASML Holding NV (ASML), and Intel (INTC) closed up more than +4%, and ARM Holdings (ARM) closed up more than +3%.

Guidewire Software (GWRE) closed down more than -19% after forecasting Q1 total annual recurring revenue of $1.25 billion to $1.26 billion, below the consensus of $1.26 billion.

Lululemon Athletica (LULU) closed down more than -17% to lead losers in the S&P 500 after reporting Q2 net revenue of $2.42 billion, weaker than the consensus of $2.46 billion, and cutting its 2027 net revenue forecast to $10.35 billion to $10.50 billion from a previous forecast of $11.00 billion to $11.15 billion, well below the consensus of $11.03 billion.

Apple (AAPL) closed down more than -2% to lead losers in the Dow Jones Industrials on reports of early negative feedback to the company’s release of its new foldable phone, the iPhone Ultra. 

Samsara (IOT) closed up more than +4% after reporting Q2 revenue of $508.4 million, above the consensus of $483.4 million, and raising its 2027 revenue forecast to $2.04 billion to $2.05 billion from a previous estimate of $2.10 billion.

Earnings Reports (9/8/2026)

Casey's General Stores Inc (CASY) and GameStop Corp (GME).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.