The Dow Jones Industrial Average fell on Friday as August’s hotter-than-expected payrolls reading increased expectations that the Federal Reserve could raise interest rates at its next meeting.

The 30-stock Dow was down 164 points, or 0.31%. The S&P 500 slid 0.17%, while the Nasdaq Composite was trading around the flatline.

Nonfarm payrolls grew 162,000 last month, much more than the 53,000 that economists polled by Dow Jones expected. The unemployment rate held steady at 4.1%, as expected. On top of last month’s gain, figures for both June and July saw upward revisions.

Treasury yields were broadly higher across the curve following the report, with the 2-year yield hitting its highest level since January 2025. Expectations that the Fed could hike rates in a couple weeks increased, as fed funds futures traders are now pricing in a 58% chance of a hike, per the CME FedWatch tool. Odds were at 49.4% a day ago.

“An upside surprise in payrolls will likely ramp up concerns about a rate hike, but that outcome is in the hands of next week’s inflation numbers,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “If those come in cooler than expected, the Fed will likely feel comfortable discounting potentially inflationary signals coming out of the labor market.”

Lululemon shares plummeted 18% on Friday after the company posted a disappointing outlook.

The company anticipates third-quarter earnings to come in between 93 cents and 98 cents per share and revenue to be between $2.29 billion to $2.32 billion. Analysts surveyed by LSEG had called for $2.40 in earnings per share and $2.53 billion in revenue. On top of that, it cut its full-year guidance.

For the second quarter, Lululemon’s revenue of $2.42 billion also missed the consensus estimate of $2.46 billion.