Lower Yields Boost Stocks Early on Soft Jobs Data
Published as of: October 2, 2026, 9:13 a.m. ET
(Friday market open) U.S. jobs growth slowed dramatically to 29,000 in September and the government reduced its estimate for the prior two reports by a combined 60,000, according to today's nonfarm payrolls report. The September headline reading was far below consensus of 84,000, and unemployment ticked up to 4.2%, above consensus for an unchanged 4.1%. Major indexes jumped early as yields sagged on the news.
"The headline readings suggest a bit of softness, with a headline miss, the downward revision over the last two months, and the increase in the unemployment rate," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research (SCFR). "It wasn't all bad, as the household survey showed a gain of 406,000 in September and the participation rate rose. Treasury yields fell following the release as this takes the pressure off the Fed to hike aggressively."
Major indexes edged up Thursday after dovish Fed talk sent short-term yields sharply lower even while oil rose. Crude fell this morning on hopes of a diesel inventory release. Pulling back, tension mounts between AI-driven earnings momentum and rising long-term yields. AI and chip leaders support the major averages, while higher rates weigh on cyclicals.
Three things to watch
- Jobs report deeper dive: Today's data recast the jobs growth narrative, which had been on the mend thanks to August's initial booming total of 162,000. That got downwardly revised to 133,000, while July's growth of 21,000 became a loss of 10,000. In addition, September's wage growth was weak at 0.1% when analysts had expected 0.3%. The unemployment rate increase might have reflected a slight drop in the number of people now seeking jobs who'd previously been marginally attached to the labor force, which actually could be positive. Checking categories, health care employment was the only area with a significant job increase last month, manufacturing jobs rose slightly, and financial activities employment dropped by 7,000 in a continued lag. August's report had been boosted by seasonal gains in educational and leisure jobs, which wasn't repeated. The three-month growth average is now around 50,000, down from 71,000 previously. Soon after the report, odds of a Federal Reserve rate hike later this month fell to just 14%, down from 70% early this week, according to the CME FedWatch Tool. "The markets expect the Fed to remain patient here," Martin said.
- Week ahead less frantic, but bond auctions loom: Next week provides a breather from the recent data blitz. However, several Treasury auctions could provide a sense of demand for U.S. debt with yields reaching multi-decade highs. Recent auction demand was far from glowing, and a repeat that keeps yields high might raise eyebrows. Still, there's no guarantee of firm demand bringing yields down. Stocks fell in September, though major indexes mostly did well despite the bond blizzard. That said, there was churn below as rate-sensitive sectors like financials and discretionary struggled. One worry is that high yields could attract investor funds away from stocks. "In terms of bonds potentially sucking money out of the equities market, so far stocks and riskier investments like lower-rated corporate bonds have generally held up well," Martin said. "It looks like earnings matter more right now—or have lately—than borrowing costs. Stocks and corporate bonds are doing relatively OK because corporate fundamentals remain pretty resilient."
- Dollar near 18-month peak: The U.S. Dollar Index ($DXY) keeps setting new 2026 highs on rate hike expectations, now approaching102, a level it hasn't traded above since April 2025. A rising dollar can hinder U.S. multinational companies by making their products more expensive abroad. If the dollar remains above 100 for a while, it might draw focus to coming earnings reports from export-heavy sectors like technology and industrials. With U.S. manufacturing apparently out of its long slump, it can also be good news that the domestic economy remains powerful. The dollar took recent cues from data that's been mostly resilient, even though housing remains lackluster and consumers report being in a bad mood. The key with consumers is to watch what they do, not what they say, and muscular August personal spending data this week showed that perhaps people are engaged in some "shopping therapy." Earnings from consumer-focused firms like Amazon (AMZN) and Apple (AAPL) late this month could provide insight into consumer trends.
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On the move
- Nvidia (NVDA) climbed 1.7% early, nearing 52-week highs. The latest boost came as Morgan Stanley reinstated Nvidia as a top pick in semiconductors after meeting with Nvidia CEO Jensen Huang.
- Tesla (TSLA) inched up ahead of its third quarter delivery data today. Analysts expect roughly 460,000. That's down from a year ago but it's a tough comparison considering last year's record amount. However, it's also expected to be down from 480,000 in the second quarter.
- Data storage stocks Seagate Technology (STX) and Western Digital (WDC) dove 12% and 8%, respectively, after Nikkei Asia reported that Toshiba is considering doubling the availability of its hard disk drive supplies to fill a gap in AI chip memory.
- AppLovin (APP) fell 5%, another rough day for a stock down roughly 50% over the last three months amid concerns about AI threats to e-commerce advertising.
- Crypto-related stocks including Strategy (MSTR) and Coinbase Global (COIN) edged up early as bitcoin rose more than 2% to approach recent three-month highs above $87,000.
- General Motors (GM) gained 3% Thursday despite a sales drop in the third quarter. The so-called Detroit Three—GM, Ford (F), and Stellantis—could see their combined U.S. market share dip to 36% for the quarter, Reuters reported. Toyota continues to benefit from the popularity of hybrids.
- Nike (NKE) plunged more than 8% after reporting earnings that slightly topped consensus but revenue that just missed. More damaging was guidance coming in well below analysts' expectations for fiscal 2027.
- On Semiconductor (ON) climbed 7% early as the chip supplier announced it was buying Synaptics (SYNA) for $5.7 billion in cash, Barron's said. Shares of Synaptics rose 14%.
- Crude fell more than 3% for U.S. futures early despite signs of rising tensions between the U.S. and Iran. The oil market came under pressure from reports of more supplies exiting the Gulf and a proposal for E.U. countries to release diesel from their emergency inventories, Reuters reported.
- KB Home (KBH) jumped 5% as lower yields after the jobs report appeared to help housing stocks.
- Mattel (MAT) jumped almost 19% Thursday on a Wall Street Journal report that the company attracted takeover interest from Authentic Brands Group, which could value Mattel at more than $20 per share.
- Boeing (BA) climbed 3% Thursday after the company avoided a strike from its largest white-collar union, CNBC reported.
- Walt Disney (DIS) dropped 3% Thursday as The Wall Street Journal reported the reorganization of its television business could cause hundreds of layoffs.
- Breadth remains weak with only 21% of S&P 500 stocks above their 50-day moving average. Just 40% are above their 200-day.
More insights from Schwab
Churn below surface: The S&P 500 Index remains near record highs, but it's more complicated below. That's one observation from the new Schwab On Investing podcast hosted by Chief Investment Strategist Liz Ann Sonders and Martin. Stock market strength may be masking weakness underneath, and investors should think about bond allocations as yields rise.
Meet Gen Alpha: Nearly half of household spending is now influenced by Gen Alpha, which has an estimated $100 billion in spending power. That influence shows up in everyday decisions—from where families eat to how much they spend on video games or lessons tied to children's passions.
Chart of the day
Data source: ICE. Chart source: thinkorswim® platform.
Past performance is no guarantee of future results.
For illustrative purposes only.
Though rate hike odds fell yesterday, the U.S. Dollar Index ($DXY—candlestick) stayed firm and topped 102 (red line), resistance that had held since April 2025. The dollar bounced off its 200-day moving average (blue line) on several occasions this year, including last month, possibly convincing investors that support would hold there. The path from here could depend on Treasury yields, which have paved the way for the strong dollar as the Fed tightens policy.
The week ahead
October 5: September ISM Services PMI®.
October 6: Expected earnings from RPM International (RPM) and Constellation Brands (STZ).
October 7: Expected earnings from Levi Strauss (LEVI) and Applied Digital (APLD).
October 8: Expected earnings from PepsiCo (PEP).
October 9: Expected earnings from Delta Air Lines (DAL) and preliminary University of Michigan October consumer sentiment.
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