Wall Street spent the week of September 28 arguing with the bond market, and the bond market was winning until Friday morning. Long Treasury yields punched through levels last seen when flip phones were fashionable, mortgage rates lurched higher, and stocks kept looking over their shoulder. Then the September jobs report arrived like a cold drink at a hot barbecue. Hiring cooled, Federal Reserve rate-hike odds collapsed, and the NASDAQ found a record. It was not a quiet open to the fourth quarter. The labor market still gets the last word.
September Jobs Report Misses
The Bureau of Labor Statistics said employers added 29,000 jobs in September, far short of the roughly 90,000 expected. Unemployment rose to 4.2 percent. July and August were revised down by a combined 60,000 jobs, and July now shows a small loss. Traders did the usual flip. Weaker hiring is awkward for households and handy for anyone hoping the Federal Reserve skips another increase this month. Odds of an October quarter-point hike fell from about 64 percent a week earlier into the low 20s. The S&P 500 rose 0.7 percent Friday to 7,722.72, and the NASDAQ climbed 1.2 percent to 27,190.86, touching a record.
Source: Reuters, October 2, 2026
Treasury Yields Hit Highs
Before Friday’s relief, the bond market had a week we won’t soon forget. The 10-year Treasury yield climbed as high as 5.33 percent, and the 30-year topped 5.69 percent on Thursday, the highest for both since 2002. By Friday the 10-year was back near 5.20 percent, still up about 20 basis points on the week. Third-quarter yield gains were the largest since 1994. New York Federal Reserve President John Williams said one more increase might still be needed late in 2026, but he saw no urgency after September’s hike. Oil helped the mood. West Texas Intermediate fell about $3 to $89.50 as Europe tapped reserves.
Source: MFS Week in Review, October 2, 2026
Cooler August PCE Inflation
Wednesday’s inflation report gave the doves something to hold. Core personal consumption expenditures prices, the Fed’s preferred gauge, rose 3.0 percent from a year earlier in August, under the 3.3 percent consensus. Headline PCE was up 3.4 percent. A methodology change did some of the softening, so this was not a pure victory lap. Households did not act worried. Personal spending jumped 0.9 percent, the kind of number that keeps hawks from fully standing down. Inflation is cooler than feared, not cool. Three percent is still a long walk from the 2 percent target.
Source: Reuters, September 30, 2026
Second-Quarter GDP Revised Up
The same morning, the Bureau of Economic Analysis lifted its third estimate of second-quarter growth to a 2.2 percent annual rate, from 1.5 percent. Forecasters had expected no change. Consumer spending was revised to 3.8 percent from 3.4 percent, and the benchmark also nudged first-quarter growth up to 2.5 percent. Put next to Friday’s soft payrolls, the picture is a little comic. Spring growth was sturdier than advertised, and September hiring is losing steam. That is a lag, not a contradiction. Growth revisions look backward. Hiring looks closer to now.
Source: Haver Analytics, September 30, 2026
Mortgage Rates Jump Sharply
Housing took the bond market yield spike personally. Freddie Mac said the average 30-year fixed mortgage rose 25 basis points in a week to 7.28 percent, the highest since November 2023 and the biggest weekly jump in about four years. A year ago the rate was 6.34 percent. Buyers who watched rates dip under 6 percent last winter can be forgiven a grim laugh. The climb tracks the Treasury selloff and higher energy costs since the Iran conflict. With midterms weeks away, the frozen market is a pocketbook issue with a campaign calendar attached.
Source: Reuters, October 1, 2026
What the Week Leaves
A 29,000 payroll print can be revised, and 1 month does not make a trend. A 10-year yield near 5.2 percent is still a heavy weight on housing. The bond market rout paused because the labor market blinked, not because inflation is finished. October’s Federal Reserve meeting just got quieter. The next data print will decide whether that quiet lasts past the coffee.
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