5.34% Yields. Then 29,000 Jobs Changed Everything

Wall Street spent the week fighting the bond market. Then Friday changed the rate story. Monday brought 5.25% Treasury yields and oil above $105. Tuesday pushed the 30-year yield to 5.62%.

Wednesday brought softer PCE inflation. Thursday sent the 10-year all the way to 5.34%, its highest level since 2002. Then Friday’s jobs report landed. Payrolls rose just 29,000.

Economists expected 90,000. Unemployment climbed to 4.2%. October Fed hike odds fell to just 16%. Treasury yields dropped. Brent slipped below $100. And stocks opened sharply higher. The week started with markets preparing for another Fed hike. It ended with traders preparing for a pause. 

Monday, September 28

Tuesday, September 29

Wednesday, September 30

Thursday, October 1

Friday, October 2, live opening snapshot

The week started badly. Oil moved higher. Treasury yields moved higher. Fed hike odds moved higher. Stocks finally broke. The 10-year hit 5.251%. The 30-year hit 5.5704%.

Brent stayed above $105. October hike odds crossed 70%. That combination hit almost every part of the market. Money was expensive. Energy was expensive. And another Fed hike looked likely. Monday set the tone for everything that followed.

Then the bond selloff got worse. The 30-year Treasury yield reached 5.6206%. That was its highest level since June 2002. The 10-year climbed to 5.293%.

Stocks weakened. But the rate story began to change later in the day. Fed officials signaled that another hike did not need to happen immediately. That helped pull October hike odds lower. The first crack appeared in the hawkish trade. 

Wednesday brought the first major piece of relief. PCE inflation came in at 3.4%. The market had expected 3.7%. Core PCE was 3.0%. That helped push October hike odds lower again.

But the report came with a problem. Consumer spending surged 0.9%. The economy was still strong. So the Fed got softer inflation without a weak consumer. That helped tech. But it kept long-term Treasury yields under pressure. The Nasdaq finished higher. The Dow did not. 

Thursday delivered the biggest bond-market number of the week. 5.34%. That was where the 10-year Treasury yield traded. It was the highest level since 2002. The global bond selloff had reached a new extreme.

Then something changed. Buyers stepped into Treasuries. The 10-year fell sharply from its high. Stocks recovered. All three major U.S. indexes finished slightly higher. That reversal mattered. For the first time all week, the market showed real demand for bonds near those levels. 

Then came the number that changed the week. 29,000. That is how many jobs the U.S. added in September. Economists expected 90,000. August was also revised down from the previous estimate to 133,000.

Unemployment rose to 4.2%. The report was weak enough to change Fed expectations fast. October hike odds fell to 16%. Before the report, they were 26%. Only days earlier, they had been near 70%. That is one of the sharpest weekly reversals in rate expectations this year. The market went from expecting another hike to largely expecting the Fed to wait. 

Friday’s reaction looked strange at first. The jobs number was weak. Stocks jumped. But the reason was clear. A weaker labor report reduces the need for another immediate Fed hike.

Treasury yields fell. Oil slipped. And high-growth stocks got relief. At the opening bell, the S&P 500 jumped 0.89%. The Nasdaq surged 1.27%. The Dow gained 0.67%. Nvidia was up more than 2% before the open.

AMD gained about 2.5%. Broadcom rose about 1.7%. For markets, weaker jobs meant less rate pressure. 

Oil was another huge part of the week. Brent started above $105. It surged and fell several times as Middle East risk shifted. By Friday morning, Brent had slipped below $100.

That is a major change. Lower oil reduces pressure on gasoline. It reduces transport costs. And it gives the Fed less reason to worry about another fresh inflation shock. Oil is still volatile. But the direction at the end of the week was very different from the start. 

This may be the most important number of the entire week. Near 70%. Then 51%. Then below 30%. Now 16%. That is the path of October Fed hike odds.

Monday said hike. Friday said pause. The change came from three things. Softer inflation. More cautious Fed comments. And a much weaker jobs report. The Fed may still raise rates later. But an October move is no longer what markets expect. 

The AI trade also refused to disappear. Micron rose after another strong outlook. Nvidia stayed strong. AMD and Broadcom rallied Friday morning. Large-cap tech kept attracting buyers even while Treasury yields were moving through multi-decade highs.

That matters because bond yields above 5% create real competition for stocks. Yet investors are still willing to own companies tied to AI spending. That is one reason the market held up better than the bond move would normally suggest. 

Stocks moved. Oil moved. Gold moved. But bonds controlled the week. The 10-year reached 5.34%. That was a 24-year high. The 30-year moved above 5.6%.

Then jobs data pushed yields sharply lower. That is the key shift. For most of the week, higher yields were hurting stocks. By Friday, lower yields were helping them. The entire risk trade changed direction in less than 5 days.

This week left markets with a short list of numbers that matter:

The week started with the bond market in control. The 10-year crossed 5.25%. Then 5.30%. Then 5.34%. Oil stayed high. Fed hike odds surged.

Stocks struggled. Then the data changed. Inflation came in softer. Fed officials pushed back on urgency. Payrolls rose just 29,000. October hike odds collapsed to 16%. Oil fell below $100.

Stocks jumped. The market spent four days fearing another Fed hike. Friday gave it a completely different problem. Growth may finally be slowing enough to make the Fed wait. 5.34% yields started the week. 29,000 jobs ended the rate scare.