Jobs Report Revives Rate-Hike Fears as Stocks End Volatile Week Lower

The major averages finished modestly lower on Friday as a stronger-than-expected August Employment Report increased expectations for a September interest-rate hike, interrupting some of the positive momentum generated by Thursday’s broad advance. The S&P 500 declined 0.4%, the Nasdaq Composite slipped 0.3%, and the Dow Jones Industrial Average fell 0.5%. Small- and mid-cap stocks bucked the broader weakness, however, with the Russell 2000 gaining 0.3% and the S&P MidCap 400 edging 0.1% higher.

The August jobs report showed stronger-than-expected payroll growth alongside a lower-than-anticipated unemployment rate, reinforcing the view that labor-market conditions remain resilient. The data prompted a meaningful shift in expectations for the Federal Reserve’s September policy decision, with the CME FedWatch Tool placing the probability of a rate hike at roughly 60%, up from about 50% on Thursday.

Cleveland Fed President Beth Hammack, a voting FOMC member, added to the more hawkish policy backdrop. Hammack said inflation remains too high, the labor market is stable, and current monetary policy is not restrictive, concluding that “it’s time to act.”

Mega-cap growth stocks were mostly lower as investors adjusted to the prospect of tighter monetary policy. The Vanguard Mega Cap Growth ETF declined 0.5%, contributing to pressure on several of the market’s largest sectors.

Consumer discretionary (-1.3%) was among the weakest groups. Tesla (TSLA 354.08, -22.28, -5.92%) surrendered Thursday’s strong advance, while lululemon athletica (LULU 100.61, -21.16, -17.38%) plunged following its earnings report.

Communication services (-0.9%) also struggled amid weakness across some of its largest components, while financials (-0.8%) ranked among the other notable laggards.

Information technology (+0.2%) managed to finish higher despite a pronounced divergence beneath the surface. Semiconductor stocks rallied sharply, pushing the PHLX Semiconductor Index up 3.4%, while software shares moved firmly in the opposite direction. The iShares GS Software ETF dropped 2.2%, extending the group’s recent volatility.

Adobe (ADBE 266.51, -19.24, -6.73%) was among the notable software laggards after announcing a new CEO, adding to the selling pressure across a group that has struggled despite strength elsewhere in technology.

Memory stocks were particularly strong within the semiconductor complex. Sandisk (SNDK 1740.00, +185.01, +11.90%) surged nearly 12% to rank among the session’s biggest winners. Stronger DRAM and NAND pricing, robust server demand, broader semiconductor strength, and a technical rebound from key moving averages all contributed to the advance.

Strength across semiconductor-related companies also provided support to industrials (+0.4%), which finished among Friday’s better-performing sectors despite the generally softer market.

Credit bureau and credit-scoring stocks represented another significant pocket of weakness following comments from FHFA Director Bill Pulte regarding potential changes to the mortgage credit-scoring market.

Fair Isaac (FICO 932.26, -186.67, -16.68%) tumbled after Pulte said Fannie Mae and Freddie Mac will allow all lenders to use VantageScore, potentially increasing competition for FICO’s mortgage-scoring business. Equifax (EFX 177.05, -12.04, -6.37%) and TransUnion (TRU 79.88, -5.04, -5.94%) also fell sharply after Pulte criticized credit-reporting agencies over pricing and said he is considering a “bi-merge” system that would require mortgage lenders to pull two credit reports instead of three.

Meanwhile, crude oil remained elevated but relatively stable following the week’s dramatic advance. WTI futures settled $0.15 higher, or 0.2%, at $91.50 per barrel amid a relative lack of new developments surrounding the U.S.-Iran conflict. Crude gained roughly 10% for the week, with its sharp rise playing an important role in the equity market’s weakness during the first half of the week.

Friday’s decline ultimately capped a volatile stretch shaped by surging oil prices, elevated Treasury yields, shifting expectations for Federal Reserve policy, and pronounced rotations within the technology sector. The major averages ended the week on a softer note, although the modest gains in small- and mid-cap stocks suggested that selling pressure was not uniform across the market.

Attention now turns firmly to inflation. Next week’s August Producer Price Index and Consumer Price Index reports will provide the next major tests for expectations surrounding the September FOMC meeting. With markets now assigning roughly a 60% probability to another rate hike, either report could produce another meaningful repricing of the interest-rate outlook.

The holiday-shortened week will be relatively light on the earnings front, although Oracle (ORCL) will provide one of the more closely watched corporate updates when it reports after Thursday’s closing bell. With monetary policy once again taking center stage, however, the inflation data are likely to remain the dominant catalyst for the market’s next move.

Our FTinvest 11 model portfolio gained 0.66% to close at 1,000.10, recovering from Thursday’s decline and narrowly reclaiming the 1,000 level heading into the weekend. The rebound leaves the portfolio approximately 8.8% below its all-time closing high of 1,096.33, keeping it outside the 10% correction threshold despite the substantial retreat from July’s record levels.

FTinvest 11 is now up approximately +7.75% year-to-date, maintaining a positive return for 2026. This week’s repeated moves above and below 1,000 highlight the ongoing volatility and the significance of that level as the portfolio attempts to stabilize after its late-August decline. Friday’s recovery provides a firmer finish to the week, although FTinvest 11 remains meaningfully below its peak as it continues its disciplined, value-driven focus on long-term capital appreciation.