Changing Expectations. A weaker-than-expected jobs report spoiled a broad set of assumptions on Wall Street, from the economy's health to the Federal Reserve's next move. Traders have now all but given up on a rate increase at the Fed's October meeting.

That shift in thinking drove all three major stock indexes higher on Friday.

The tech-heavy index Nasdaq Composite rose 1.2%, helping push the index into a winning week. The S&P 500 rose 0.7%, while the Dow Jones Industrial Average gained 250 points, or 0.5%-those indexes were still down for the week, though.

Meanwhile, shorter duration bond yields initially fell on the job news, but still ended the day higher, with the yield on the 2-year Treasury back up to 4.8% by the end of the day. The 10-year yield settled at 5.3%.

The September jobs report from the U.S. Bureau of Labor Statistics remained a noisy set of data-a "random number generator" as TS Lombard Economist Dario Perkins likes to call the report.

After uncharacteristically strong payroll gains in August, job growth advanced by just 29,000 last month. That was dramatically below expectations. The BLS estimates for July and August job gains were lowered by 60,000 combined.

"U.S. payroll data have always been volatile, but 2026 has taken that to new extremes," Perkins noted.

Still, the average monthly employment gain over the last three months is now 51,000, in line with what most economists believe to be sufficient to balance overall labor supply and demand.

The unemployment rate ticked up to 4.2% in September, up from 4.1%. The rise was generally the result of stronger labor participation and growth in the labor force. Monthly wage growth proved subdued, rising just 0.1% in September. That's a good sign that the labor market isn't boosting inflationary pressures, but it's a tough break for the many Americans struggling with higher costs of living.

Despite the headline jobs miss, the data point to continued stable conditions in the job market. On a 12-month basis, the unemployment rate is down, jobless claims signal low layoffs, and job growth is enough to keep the labor market in balance. With that in mind, the September jobs report shouldn't shift the Fed's focus away from inflation, writes Shruti Mishra, U.S. economist at Bank of America.

"But given the slew of dovish Fedspeak this week, we aren't surprised that markets viewed it as yet another reason to price out an Oct hike," she added. Inflation will be the determining factor, however, so we'll be watching for the underlying trends in the upcoming consumer price index data due out Oct. 14

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This Weekend's Magazine

The Calendar

Next week is light on clear market catalysts with no major economic data releases on tap and the earnings calendar looking quiet. But it's just a brief respite ahead of the third-quarter earnings season which unofficially starts when the big banks report results on Oct. 13.

There are earnings reports from three S&P 500 companies on tap: Constellation Brands on Tuesday, PepsiCo on Thursday, and Delta Air Lines on Friday.

Also next, week, the Institute for Supply Management releases its Services Purchasing Managers' Index on Monday, while the Federal Open Market Committee releases the minutes from its mid-September meeting. On Friday the University of Michigan releases its Consumer Sentiment survey.

-Dan Lam

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