U.S. stocks fell after surprisingly strong jobs data muddied the outlook for Federal Reserve policy. The Dow Jones Industrial Average dropped 250 points, or 0.7%, while the S&P 500 and Nasdaq Composite each slid about 0.8%. The selloff was driven by a spike in Treasury yields, as investors bet the Fed would need to keep interest rates higher for longer.

The Labor Department reported that the U.S. economy added 187,000 jobs in August, exceeding expectations of 170,000. The unemployment rate rose to 3.8%, but wage growth remained firm, with average hourly earnings up 4.3% year over year. This data reignited concerns that inflation is still too sticky for the Fed to ease policy anytime soon.

Treasury yields surged, with the 10-year note climbing to 4.18%, its highest level in over a month. Higher yields pressured growth stocks, particularly technology shares. Apple and Microsoft both fell more than 1%, while Tesla dropped 2%.

Investors now see a higher probability of a rate hike at the Fed's September meeting, with futures pricing in a 35% chance, up from 20% a week ago. Fed Chair Jerome Powell has emphasized that decisions will remain data-dependent, and this report adds to the case for another increase.