Soft Jobs Report Cools Hike Bets as Yields Hold Near Multi-Decade Highs
October 5, 2026
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Last week ended with a weaker-than-expected September employment report that eased pressure on the Federal Reserve (Fed) to raise rates again. Nonfarm payrolls rose just 29,000 versus roughly 84,000 expected, the unemployment rate ticked up to 4.2% and July and August were revised down by a combined 60,000.1 Odds of an October hike fell to about 14% from roughly 70% earlier in the week.2 Treasury yields dropped sharply on the news, with the 10-year falling to 5.16% before rebounding to close near 5.28%.3,4
Equities were mixed for the week. The Nasdaq Composite Index gained 0.6%, while the S&P 500 Index slipped 0.3% and the Dow Jones Industrial Average fell 1.3%.5 Market breadth remains narrow, with only 21% of S&P 500 Index stocks above their 50-day moving average.6
From a fixed-income perspective, yields near 5% across much of the curve offer attractive income, and corporate bonds have held up well as fundamentals remain resilient.7 This week’s Treasury auctions will test demand for U.S. debt with yields near multi-decade highs.8
This week is lighter on data, with the Fed back in focus. The September Institute for Supply Management (ISM) Services Purchasing Managers' Index (PMI) is due Monday, with consensus at 55.9 On Wednesday, the Federal Open Market Committee (FOMC) releases minutes from its September meeting,10 when it raised rates by 25 basis points (bps) and signaled one more hike this year. Several Fed officials are scheduled to speak during the week, and the University of Michigan's preliminary October consumer sentiment survey arrives Friday.11
Earnings will be limited, with Constellation Brands reporting on Tuesday, Levi Strauss on Wednesday, PepsiCo on Thursday and Delta Air Lines on Friday.12 Third-quarter reporting season will begin in earnest next week.
Meanwhile, energy prices and Middle East developments remain a key risk for inflation and the Fed's next move.
Sources:
1,2,6-8,12Charles Schwab – Lower Yields Boost Stocks Early on Soft Jobs Data; 10/2/26
3Yahoo! Finance – Markets News, Oct. 2, 2026: Indexes Rise Friday After Weak Jobs Report; Nasdaq Hits New High; Dow, S&P 500 Book Weekly Losses; 10/2/26
4CNBC – 10-year Treasury yield ticks higher despite weaker-than-expected jobs report; 10/2/26
5CNBC – Stocks rise Friday after soft jobs data, Nvidia leads Nasdaq to intraday record; 10/2/26
9-11MarketWatch – U.S. Economic Calendar; as of 10/5/26
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