U.S. stocks fell Friday after the government reported employers unexpectedly added 162,000 jobs last month, far above the 65,000 forecast. The S&P 500 dropped 0.4%, the Dow Jones Industrial Average fell 0.5%, and the Nasdaq composite lost 0.3%. The stronger-than-expected hiring could give the Federal Reserve leeway to raise its benchmark interest rate at its Sept. 16 meeting. Treasury yields rose, with the 10-year Treasury climbing to 4.78% from 4.77%. The unemployment rate held at 4.1%.

Odds of a September rate hike jumped to 60.4% following the report, up from 49.4% the day before. Fed Chair Kevin Warsh said at the Jackson Hole symposium that inflation had not shown sufficient improvement and the central bank might have "more work to do." However, Fed governor Christopher Waller suggested he would favor holding rates steady if next week's inflation data cools.

Inflation has held above 3% for most of the year, with the August CPI report due Sept. 11. The Fed's target remains 2%. "Today's jobs report does lean toward the Fed increasing rates," said Terry Sandven of U.S. Bank Asset Management Group, though he cautioned a hike is "not a foregone conclusion."