Nasdaq Sets Record as Weak September Jobs Report Cuts Odds of Another Fed Rate Hike

The Labor Department reported Friday that U.S. employers added only 29,000 jobs in September. Economists polled by Reuters had expected 90,000, according to the London Stock Exchange Group's wire coverage and FX Empire. CNBC cited a slightly lower Dow Jones consensus of 84,000. Either way, the miss was large, and the Labor Department also revised the prior two months' job counts sharply lower, though none of the sources specified by how much.

Unemployment rose to 4.2% from 4.1%, missing expectations that it would hold steady, CNBC and Yahoo Finance both reported.

Stocks rose anyway. By midday the Nasdaq Composite had pushed to an intraday record, with gains ranging from 1.16% to 1.66% depending on the snapshot: Economies.com, citing figures as of 14:42 UTC, put the Nasdaq up 447.84 points to 27,319.43, while FX Empire's 16:06 GMT read had it at 27,182.09, up 1.16%. The S&P 500 and Dow also gained, with Reuters-sourced coverage carried by LSE putting the Dow up 0.60% and the S&P up 1.02% as of 17:09 that day.

The reason for the rally is straightforward and every source agrees on it: a weak labor market lowers the odds the Federal Reserve raises interest rates again this month. FX Empire noted the Fed had already raised rates in September, and traders had been debating whether the economy was strong enough to justify a second hike in October. Friday's report made that case much harder to make.

The actual odds varied by source and by the minute. CNBC's CME FedWatch read showed a 78% likelihood the Fed holds rates steady in October, up from 76% the day before. Ground News cited an 86% hold probability. Economies.com and FX Empire both put the chance of a quarter-point October hike at 20%, down from 26% before the report. Yahoo Finance had the hike odds at just 16%, down from 64% a week earlier. The spread reflects different snapshots taken at different times as traders digested the data throughout the morning, not a disagreement over direction.

That direction matters because inflation has not gone away. Yahoo Finance reported the war in the Middle East is now in its eighth month and has driven much of the current inflationary pressure, and that President Donald Trump has said he's considering resuming bombing of Iran after the midterm elections while also looking for a resolution. Yahoo Finance, citing Bloomberg, reported the U.S. sent an additional aircraft carrier and 10,000 sailors and Marines to the Persian Gulf on Thursday, October 1.

Oil prices fell regardless, adding to the risk-on mood. Brent crude dropped to around $99 a barrel, Yahoo Finance reported, after the G7 nations announced a plan to release 100 million barrels of crude oil and diesel onto the market over four months, coordinated by the International Energy Agency, under pressure from the Trump administration. French President Emmanuel Macron first announced the release, according to Yahoo Finance.

Not every mover was tied to the jobs report. Nike shares fell 5.6%, Economies.com reported, after the company warned of a sharp, unexpected revenue decline tied to weakness in China and announced job cuts and a restructuring of its global business divisions. Moderna rose on news of its inclusion in the Nasdaq-100, per the Reuters wire carried by LSE. Data storage stocks slumped on a report that Toshiba plans to double hard disk production capacity. Tesla's third-quarter deliveries beat Wall Street estimates, coming in at 486,532 against a forecast of 461,100, CNBC reported, though that was down from 497,099 a year earlier.

Seeking Alpha's own headline on the day called it "bad news is good news," and that framing is worth examining. If stocks only climb because a weak labor market makes the Fed less likely to tighten, that's a market leaning on central bank behavior rather than economic fundamentals. A 29,000 print with sharp downward revisions to the prior two months is not a strong jobs market by any honest reading, and investors cheering it suggests the rally is increasingly a bet on Fed patience, not business strength.

The backdrop adds to that read. The Epoch Times, covering the prior week through September 25, reported the 10-year Treasury yield had touched 5.15%, its highest since 2007, and the 30-year climbed above 5.44%, a level not seen since 2004, even as the Nasdaq notched its own record that week on AI optimism tied to Meta, AMD, and Microsoft. Small-cap stocks, measured by the Russell 2000, fell that week and have been the market's worst performer for weeks running, per the Epoch Times, a sign the rally remains narrow and concentrated in a handful of mega-cap tech and chip names rather than broad-based.

The Fed's next meeting will settle whether Friday's number was enough to keep it on hold. Until then, the open question is whether a labor market adding fewer than 30,000 jobs a month, with unemployment rising and the Fed just having hiked rates in September amid war-driven inflation, is actually bullish news or just the market's latest excuse to keep buying the same handful of AI stocks.