US equities slip on hotter jobs data as Fed rate hike expectations rise

Strong jobs data complicates the Fed outlook

United States (US) equity markets finished lower on Friday after a hotter-than-expected August jobs report revived expectations of a rate hike later this month. Nonetheless, the Nasdaq 100 (+0.09%) managed to finish higher for a fifth week in the past six, as did the S&P 500 (+0.38%), while the Dow Jones finished 146 points (-0.27%) lower.

Non-farm payrolls (NFP) rose by 162,000 in August, well above the 55,000 expected, and the prior two months were revised up by a combined 55,000. The unemployment rate held at 4.1%, while the participation rate lifted to 61.6% from 61.4%.

The pickup in payrolls largely reflected a rebound in leisure and hospitality (+62,000) and local government education (+42,000), as both sectors normalised after recent large declines, along with continued strength in health care and construction. Following those upward revisions, the three-month average of payroll growth now stands at a much healthier 71,000, versus 20,000 before Friday's report.

Overall, the jobs report was good news for the economy, but not such good news for those hoping the Federal Reserve (Fed) will sit tight at its 16 September meeting. That is especially so after hopes were raised by Fed Governor Christopher Waller's dovish speech earlier in the week.

Looking ahead, with US cash markets closed tonight for the Labor Day long weekend, the real action is Thursday night's producer price index (PPI) and Friday night's consumer price index (CPI), previewed below. Those releases will help project the next personal consumption expenditures (PCE) reading and provide a clearer indication of which way the Fed may lean at next week's interest rate meeting.

The market will also keep an eye on a worrying turn of events in the Middle East over the weekend after the US struck and disabled three Iranian oil tankers in response to Iran targeting two US warships with ballistic missiles. Crude oil has started the new week modestly higher at $91.68 (+0.50%), while US equity futures have reopened mostly unchanged from Friday's close.

US inflation (August)

Date: Friday, 11 September at 10.30pm AEST

July's CPI report showed the annual headline inflation rate slowing to 3.4% from 3.5% in June, in line with expectations and falling further from the 4.2% peak reached in May 2026. Core CPI rose 0.2%, allowing the annual rate of core inflation to ease to 2.5% from 2.6%, also in line with expectations.

August's figures will be scrutinised for evidence of whether that moderation in core inflation is being sustained, or whether higher energy prices are beginning to feed through into broader price pressures. Consensus expects core inflation to rise about 0.2% month-on-month (MoM), allowing the annual core rate to ease another notch to 2.4%. Headline CPI is expected to remain at 3.5% year-on-year (YoY).

A hotter print, for example core inflation at 0.3% MoM, would likely push rate hike probabilities higher again ahead of next week's Federal Open Market Committee (FOMC) meeting. A 0.1% MoM print would increase the chances the Fed stays on hold into year end.

The US rates market starts the week pricing in 15 basis points (bp) of hikes for the Fed's 16 September meeting and 60 bp of hikes between now and June 2027.

US core inflation rate chart

Nasdaq 100 technical analysis

From its late-March low of 22,841, the Nasdaq 100 launched a powerful 35% rally in just over nine weeks to reach a record high of 30,762 in early June.

The correction that followed has now entered a fourth month and, provided the Nasdaq 100 remains above short-term support at 28,800ish, we expect a retest and break of the 30,762 record high before a move towards 32,000.

Aware that a sustained break below 28,800ish would negate the short- to medium-term bullish view and open the way for a retest of trend-channel support now near 27,600.

Nasdaq 100 daily candlestick chart

Dow Jones technical analysis

From its late-March low of 45,063, the Dow Jones staged an orderly rally of 9686 points (+21.40%) into the August high of 54,749. Pullbacks of about 3.5% in June and July held logical support at 50,000 and 51,500 before the index regrouped and pushed on to fresh record highs.

In early August, the Dow Jones underwent another correction, again of about 3.5%, down to 52,760. The jury is still out on whether that correction is complete and the uptrend has resumed, or whether there is more downside to come.

For now, as long as the Dow Jones holds above the recent 52,760 low, the uptrend remains intact, with scope for another leg towards 56,000. A sustained break through the 52,750 support zone would suggest a deeper decline is underway, first towards 51,500 and potentially 50,000.

Dow Jones daily candlestick chart

• _{Source: TradingView. The figures stated are as of 7 September 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}