Equities Fall Following Weak Jobs Report as Potential Fed Rate Cut Looms

05:06 PM EDT, 09/05/2025 (MT Newswires) -- US equities fell Friday following a weaker-than-expected jobs report that left Wall Street more convinced that the Federal Reserve will cut interest rates this month.

The Dow Jones Industrial Average declined 0.5% to 45,400.9. The S&P 500 dropped 0.3% to 6,481.5 from a record-high close in the previous session. The Nasdaq Composite was marginally lower at 21,700.4. Among sectors, energy saw the biggest drop, while real estate paced the gainers.

For the week, the Nasdaq climbed 1.1%, while the S&P 500 advanced 0.3%. The Dow lost 0.3%.

In economic news, the US economy added 22,000 nonfarm jobs last month, official data showed. The consensus was for a 75,000 increase in a survey compiled by Bloomberg. The unemployment rate rose to 4.3% as Wall Street expected from 4.2% in July.

"Another soft jobs report is intensifying calls for meaningful (Fed) interest rate cuts," James Knightley, chief US economist at ING, said in a report. "Consumers are already worried about squeezed spending power from tariffs and are now increasingly concerned about job security."

The odds of a 25-basis-point rate cut on Sept. 17 were at 92% on Friday, while Fed funds futures priced in an 8% chance for a reduction by half a percentage point, according to the CME FedWatch tool.

"Some investors are questioning whether the Fed could cut by 50 (basis points) in September," Knightley said. "They could increase in number after next Tuesday's preliminary benchmark revisions to payrolls for the 12 months to March 2025."

US Treasury yields fell, with the 10-year rate losing 6.8 basis points to 4.09% and the two-year rate tumbling 6.2 basis points to 3.54%.

In company news, Lululemon Athletica (LULU) shares tumbled nearly 19%, the steepest decline on the S&P 500. The athletic apparel and footwear retailer late Thursday lowered its full-year outlook due to higher tariff rates, while its fiscal second-quarter sales fell short of market estimates amid weakness in North America.

Tesla (TSLA) shares were up 3.6%. The electric vehicle maker's board proposed a new compensation package potentially worth around $1 trillion for Chief Executive Elon Musk that would boost his voting power in the electric vehicle maker, a provision Wedbush Securities said is "critical" to retain him.

Broadcom (AVGO) was the top gainer on the S&P 500, up 9.4%. Late Thursday, the chipmaker posted stronger-than-expected fiscal third-quarter results amid robust artificial intelligence chip demand.

The company has secured more than $10 billion in orders of custom AI racks from a new customer, Broadcom (AVGO) CEO Hock Tan said. "Reflecting this, we now expect the outlook for fiscal 2026 AI revenue to improve significantly from what we had indicated last quarter," Tan said on an earnings conference call.

Although the company didn't disclose the name of the new customer, markets are speculating that it could be Microsoft (MSFT) backed OpenAI. The parent of generative AI chatbot ChatGPT is working with Broadcom (AVGO) to produce its own AI chip, which is expected to ship next year, the Financial Times reported, citing people familiar with the partnership.

Nvidia (NVDA) shares were down 2.7% intraday, the second worst performer on the Dow.

West Texas Intermediate crude oil was down 2.3% at $62.03 a barrel in Friday late-afternoon trade.

Eight members of the Organization of the Petroleum Exporting Countries and its allies will contemplate further increasing output next month at their meeting scheduled for Sunday, Reuters reported, citing sources.

Speculation over an output hike weighed on oil prices, Saxo Bank said in a report on Friday. The OPEC+ cartel has restored 2.2 million barrels per day of supply so far this year, Saxo said on Thursday.

Gold was up 1.1% at $3,647.70 per troy ounce, while silver added 0.2% to $41.48 per ounce.

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