Stocks wobble as Wall Street wrangles with whether the job market is too weak

The action was more decisive in the bond market, where Treasury yields tumbled after a report from the Labor Department said U.S. employers hired fewer workers in August than economists expected. The government also said that earlier estimates for June and July overstated hiring by 21,000 jobs.

The disappointing numbers follow last month’s discouraging jobs update, along with other lackluster reports in intervening weeks, and traders are now betting on a 100% probability that the Fed will cut its main interest rate at its next meeting on Sept. 17, according to data from CME Group. Investors love such cuts because they can give a kickstart to the economy, but the Fed has held off on them because they can also give inflation more fuel.

So far this year, the Fed has been more worried about the potential of inflation worsening because of President Donald Trump’s tariffs than about the job market. But Friday’s job numbers could push the Fed to consider cutting rates in two weeks by a steeper amount than usual, said Brian Jacobsen, chief economist at Annex Wealth Management.

“This week has been a story of a slowing labor market, and today’s data was the exclamation point,” according to Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management.

Strong hiring for health care jobs had been helping to support the overall market, “but with it now showing some tangible signs of decline, the foundation underneath the labor market seems to be cracking,” said Rick Rieder, chief investment officer of global fixed income at BlackRock.

While the data on the job market is disappointing, it’s still not so weak that it’s screaming a recession is here, and the U.S. economy is continuing to grow. A big question for investors is whether the job market can remain in a balance where it’s not so strong that it prevents cuts to interest rates but also not so weak that the economy falls off.

Uncertainty about that helped lead to Friday’s swings in the stock market. Wall Street needs things to go as hoped because it already sent stock prices to records amid expectations for a Goldilocks scenario where interest rates ease, and the economy keeps chugging along.

On Wall Street, Friday’s heaviest weight was Nvidia, the chip company that’s become the face of the artificial-intelligence boom. It’s been contending with criticism that its stock price charged too high, too fast and became too expensive following Wall Street’s rush into AI, and it fell 2.7%.

Lululemon dropped 18.6% after the yoga and athletic gear maker’s revenue for the latest quarter fell short of analysts’ expectations. CEO Calvin McDonald pointed to disappointing results from its U.S. operation, while Chief Financial Officer Meghan Frank said Lululemon is facing “industrywide challenges, including higher tariff rates.”

Still, more stocks rose on Wall Street than fell. Leading the way was Broadcom, which climbed 9.4% after reporting better profit and revenue for the latest quarter than analysts expected. CEO Hock Tan said customers are continuing to invest strongly in AI chips.

Tesla rose 3.6% after proposing a payout package that could reach $1 trillion for its CEO, Elon Musk, if the electric vehicle company meets a series of extremely aggressive targets over the next 10 years.

Smith & Wesson Brands jumped 6.5% after the gun maker delivered better results for the latest quarter than analysts expected. CEO Mark Smith said it saw good demand for new products in what’s traditionally a slow season for sales of firearms.

All told, the S&P 500 fell 20.58 points to 6,481.50. The Dow Jones Industrial Average dipped 220.43 to 45,400.86, and the Nasdaq composite slipped 7.31 to 21,700.39..

In stock markets abroad, indexes in Europe lost early gains to turn lower with Wall Street. That followed strength across much of Asia.

The Nikkei 225 rallied 1% in Tokyo after data showed accelerating growth in earnings for Japanese workers. Chinese markets rebounded following three days of decline, with indexes rising more than 1% in both Hong Kong and Shanghai.

In the bond market, the yield on the 10-year Treasury dropped to 4.09% from 4.17% late Thursday and from 4.28% on Tuesday. That’s a notable move for the bond market and could mean lower interest rates are coming for mortgages and other loans.

AP Writers Matt Ott and Teresa Cerojano contributed.