Key facts
- September jobs report showed 29,000 jobs added, below expectations.
- Unemployment rate rose to 4.2% in September.
- Markets price an 83% chance of Fed rate hold in October.
- 10-year Treasury yield fell 6 basis points to 5.17%.
- 2-year Treasury yield fell 6 basis points to 4.72%.
- Dow Jones Industrial Average gained 500 points.
US stocks rallied and bond yields dropped on Friday following a weaker-than-expected September jobs report, which has led investors to anticipate that the Federal Reserve may hold off on further interest rate hikes. The economy added only 29,000 jobs, significantly missing the around 90,000 expected, and the unemployment rate unexpectedly climbed to 4.2% from 4.1%.
This softer labor market data, combined with a benign personal consumption expenditures reading earlier in the week, has prompted a swift repricing of rate expectations. Markets are now pricing in an 83% probability that the Fed will keep rates unchanged at its October policy meeting, according to the CMEFedWatch tool. The likelihood of rates remaining on hold through the end of the year also increased to 25%, up from 7% last week.
The benchmark 10-year US Treasury yield fell as much as 6 basis points to 5.17%, while the 2-year Treasury yield, closely tied to Fed rate expectations, also dropped by 6 basis points to 4.72%. Major stock indexes saw significant gains, with the Dow Jones Industrial Average soaring 500 points and the tech-heavy Nasdaq Composite rising more than 1%. Investors showed particular interest in tech stocks, including Advanced Micro Devices, Nvidia, Meta, Microsoft, Micron, and Broadcom, which all saw gains.
Analysts noted the implications of the jobs report for monetary policy. Jamie Cox, managing partner at Harris Financial Group, stated there is "zero chance for a rate hike in October." Seema Shah, chief global strategist at Principal Asset Management, commented that the jobs report "should put an October Fed hike firmly on the back foot." Adam Schickling, a senior economist at Vanguard, suggested the data "strengthens the case for the Federal Reserve to remain patient."