Investors brace for potential rate hike amid stronger-than-expected August jobs report

The U.S. added 162,000 jobs in August, the Labor Department reported on Friday, and the unemployment rate stayed at 4.1%.

This stronger-than-expected result arrives amid rising Treasury yields that arguably led to U.S. Treasury Secretary Scott Bessent's intervention, ongoing U.S.-Iran conflict and Fed Chair Kevin Warsh's recent Hawkish tone at the Jackson Hole symposium.

As of 9:30 am ET, rate hike probability increased to 60%, according to CME Fed Watch, a 10% increase following yesterday's 50/50 divide after Fed Governor Christopher Waller signaled support for holding rates.

I will be closely monitoring the August CPI releasing on Sept. 11 for any signs of cooling. A cooler data following June and July readings of 3.5% and 3.4%, respectively, could make for a downward trend, potentially a nod to some economists' base case that one-off energy shocks caused by the Iran conflict would be absorbed, thus not requiring Fed intervention.

With a hot job market and inflation running well over the Fed's 2% target, I don't see why Chair Warsh wouldn't raise rates in the September FOMC meeting.

Still, Warsh is facing an interesting dilemma – if the Fed raises interest rates, he risks infuriating the White House 60 days before the midterm elections. U.S. Vice President JD Vance yesterday urged the Fed to cut interest rates at a White House briefing.

S&P 500 Index is down 0.09% at market open, and U.S. 10-Year Treasury yield rose nearly 3 basis points.