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WEEKLY MARKET RECAP: STRONG JOBS PERFORMANCE AND STICKY INFLATION

U.S. markets closed the week little changed, but the tone shifted Friday. A much stronger August jobs report pushed Treasury yields and the dollar higher, and sent stocks lower into the close. It also revived talk of a Federal Reserve rate hike later this month.

The tension for investors is now clear. Hiring and economic activity look sturdier than expected, yet input costs remain persistently high.

Here’s how markets performed, and the headlines behind the numbers.

STOCK MARKET RECAP:

• The S&P 500 edged up 0.09%.
• The Nasdaq 100 rose 0.38%.
• The Dow Jones Industrial Average slipped 0.27%.

WHAT THE DATA REVEALS:
A STRONG JOBS REPORT. Employers added 162,000 jobs in August, far above expectations, while unemployment held at 4.1%. July’s job openings, released the same week, showed a labor market that’s neither expanding nor contracting, with hiring and layoffs both roughly flat. Together, the data points to stabilization after a weak summer. That eases recession worries, but it also keeps a rate increase a real possibility.

YIELDS, NOT STOCKS, DROVE THE WEEK. The major indexes finished with only modest changes, masking a volatile, rate-driven week underneath. The 10-year Treasury yield pushed above 4.78%, a 20-month high, while short-term yields jumped on renewed expectations of a Fed rate hike. Higher yields raise borrowing costs across the economy and weigh hardest on companies whose profits are expected further in the future.

INFLATION PRESSURES STILL PRESENT A CHALLENGE. Brent crude oil neared $96 a barrel amid renewed U.S.-Iran tensions, adding to inflation risk. Additionally, services businesses reported prices paid at a four-year high. The longer inflation remains problematic, the more pressure it puts on the Fed to act, and now, markets are increasingly leaning toward a hike in September.

THE WEEK AHEAD:
The biggest thing to watch is inflation itself. On Thursday, Sept. 10th, Consumer Price Index (CPI) and producer-price data will show whether the high prices businesses have been reporting are reaching consumers, impacting the Fed’s options and bond yields. Additionally, Treasury yields deserve attention this week, especially if the 10-year climbs further.

We’ll be watching how these developments unfold. If any of this raises questions, or you’d like to talk it through, feel free to reach out anytime.

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