US stocks came under pressure on Friday as hotter-than-expected nonfarm payroll data fueled expectations that the Federal Reserve will raise interest rates at its upcoming meeting. The S&P 500 slipped 0.4%, with consumer discretionary, healthcare, and energy sectors leading the decline, trimming the benchmark's weekly gain to just 0.1%. Meanwhile, the Nasdaq 100 managed a modest 0.2% advance, bringing its weekly increase to 0.4%. US markets will be closed on Monday for a public holiday.

According to swaps contracts, traders now price in a probability of more than 50% for a rate hike this month. However, analysts point out that the ultimate decision for the September meeting may still hinge on inflation data scheduled for release next week. The US economy added 162,000 jobs in August, exceeding expectations, while July's figures were revised upward from a decline. The unemployment rate held steady. The surprise jump in hiring provides additional justification for the Fed to tighten policy, though it remains far from certain. Crucially, the report shows no evidence that the labor market is intensifying price pressures.

Adding to the drama, former President Trump escalated his public pressure campaign on the Fed to cut rates, threatening that failure to act could lead the US to sever trade ties with countries running surpluses against it. Ellen Zentner, Chief US Economist at Morgan Stanley Wealth Management, noted that the surprisingly strong jobs report could further amplify market anxieties about a rate increase. Nevertheless, she emphasized that the final outcome still lies with next week's inflation figures. Should price data come in softer than expected, the Fed might be in a stronger position to brush aside the potential inflation signals emanating from the strong labor market.