The U.S. Economy Just Added 162,000 Jobs in August, Blowing Past Estimates: That's Both Good and Bad News for the Stock Market.

The U.S. economy added 162,000 jobs in August, crushing economist estimates of 53,000, with gains spread across restaurants, government, education, and manufacturing. The blowout print pushed the probability of a Federal Reserve rate hike in September from 50% to 62.4%, triggering a risk-off move in equities as investors braced for tighter monetary policy and elevated recession risk.

The labor market strength is a double-edged sword. Broad-based hiring signals economic resilience, but it also removes the Fed's rationale to pause its tightening cycle. The 12.4-percentage-point jump in September hike odds reflects hawkish repricing across rate-sensitive assets, weighing on equity multiples and amplifying concerns that the central bank will overtighten.

CME Group's FedWatch tool, derived from fed funds futures, captures the shift in policy expectations following employment surprises. Higher rate probabilities typically compress valuations and dampen risk appetite, particularly in growth sectors sensitive to borrowing costs.