Stocks gain as rate hike bets ease on soft NFP - Newsquawk US Market Wrap

• SNAPSHOT: Equities up, Treasuries down, Crude down, Dollar down, Gold down
• REAR VIEW: NFP softer than expected; G7 leaders confirm 100mln barrels release, Macron said diesel and crude stocks to be released over 4 months; Fed's Logan sees at least 50bps of hiking need to return inflation to 2% goal; Toshiba is to double AI data center HDD capacity by FY27; TSLA Q3 deliveries beat.
• COMING UP: Data: Japanese Consumer Confidence (Sep), Global S&P Services/Composite PMI Final (Sep), EU PPI (Aug), US ISM Services PMI (Sep). Speakers: ECB's Schnabel; Fed's Goolsbee
• WEEK IN FOCUS: FOMC Minutes, US ISM
  Services PMI, OPEC+, Canadian Jobs and ECB Minutes
  Click here for the full report.
• WEEKLY US EARNINGS ESTIMATES: PEP the highlight in a thin week of earnings. Click here for the full report.

More Newsquawk in 2 steps:

• 1. Subscribe to the free premarket movers reports
• 2. Trial Newsquawk’s premium real-time audio news squawk box for 7 days

MARKET WRAP

US indices closed the final session of the week in the green, as did all sectors, with Consumer Discretionary and Materials the outperformers. The key risk event on Friday was the soft US payrolls report, as the headline underwhelmed, and the unemployment rate rose, albeit as did the participation rate. Following the release, there was a notable dovish reaction with upside in US equity futures, US Treasuries, and spot gold, accompanied by downside in the Dollar. However, since the data print the moves have pared into weekend trade, where participants await any Middle East update. In the energy complex, which sparked initial downside, French President Macron confirmed that diesel and crude stocks would be released over 4 months, and G7 leaders confirmed the release of up to 100mln barrels of oil and diesel stocks.
2nd October 2026

NFP

US JOBS REPORT REVIEW: The September jobs report was soft, with just 29k jobs added, below the 90k consensus and the prior 133k, which was revised down from 162k. The net revision to July and August payrolls was -60k, suggesting that the labour market was not as strong as initially thought, and favourable seasonal dynamics may have supported the August release. Private payrolls slowed to 46k from 89k, with the prior revised down from 127k. The unemployment rate also ticked up to 4.2% from 4.1%, alongside an increase in the participation rate to 61.8% from 61.6%. The weak headline payroll growth, rise in unemployment and negative revisions add to concerns around the labour market. However, the labour market has remained relatively robust, and Fed officials have largely characterised it as close to full employment. One report is therefore unlikely to completely change that assessment, particularly given the Fed's emphasis on trends rather than individual data points. However, when accompanied by the downward revisions, the weakness is more notable. Pantheon Macroeconomics highlights that the three-month average of payroll growth now stands at just 51k, which it suggests is "probably slightly below the break-even pace". Moreover, officials have been more focused on the inflation side of the dual mandate, meaning the September CPI report on October 14th will be key. Nonetheless, the jobs report likely cements expectations for an October pause, particularly following the softer August core PCE data and calls for patience from Williams and Jefferson, while Bowman favours no further hikes this year. Money markets now assign just a 16% probability of an October hike, down from 24% on Thursday evening. Looking ahead, Pantheon expects the Fed to hold in October and notes December remains a close call, but expects continued weakness in payrolls alongside slower services inflation to give the FOMC sufficient grounds to look through an anticipated rise in core goods inflation and keep policy unchanged.

FED

LOGAN (2026 voter): Policy rate needs to increase an additional 50bps or more, and that without higher rates, inflation will not get to the 2% goal. She added that policy is not sufficiently restrictive and needs to become modestly tighter, and that economic growth is gaining momentum, while the labour market remains well balanced. The hawk added that, at a minimum, several further rate hikes would reverse last autumn’s cuts, and reiterated the Fed's message that price stability must be restored. Added it remains uncertain how high the policy rate must go to bring inflation back towards 2%. Higher yields may partly reflect increased term premiums, which could lessen the need for additional policy tightening. Rising long-term yields suggest investors expect interest rates to remain higher and will continue monitoring bond-yield developments and evaluate their implications.

GOOLSBEE (2027 voter): Labour market is steady, and the inflation side of the Fed's job is more important. Plenty of room for anything on the table as far as a rate hike or pause, and open to seeing if they get evidence they are heading back to 2% inflation. Chicago Fed President won't rule out any decision at the next rate meeting.

FIXED INCOME

T-NOTE FUTURES (Z6) SETTLED 9+ TICKS LOWER AT 104-11+

Yield rally despite despite soft jobs report and lower energy prices. At settlement, 2-year +3.6bps at 4.827%, 3-year +5.2bps at 4.958%, 5-year +5.0bps at 5.059%, 7-year +4.5bps at 5.171%, 10-year +3.8bps at 5.281%, 20-year +2.9bps at 5.677%, 30-year +1.9bps at 5.632%.

It was a choppy day for T-notes, with the curve sold. Overnight, Fed's Logan (2026 voter, hawk) said at least 50bps or more of further Fed rate hikes are needed and that several additional hikes are required to reverse last autumn's cuts; otherwise inflation will not return to 2%. However, she also acknowledged that elevated longer-term yields may partly reflect higher term premiums, which could lessen the need for policy tightening.

The highlight was the US Nonfarm Payrolls report. Ultimately, it was a weak report, with just 29k jobs added versus the 90k consensus, while the prior was revised down to 133k from 162k. The two-month net revision was -60k, taking the three-month average to 50.7k from 71k. The unemployment rate also ticked up to 4.2% from 4.1%; notably, the Fed median sees unemployment at 4.1% through 2029, while the longer-run median stands at 4.2%. The initial reaction was, as expected, dovish, with yields falling across the curve as participants continued to price out the chance of an October rate hike. However, much of the move subsequently pared, with yields ultimately settling largely higher across the curve.

Although the report was soft on the headline, it is worth noting that the Fed tends to focus on trends rather than individual data points. The combination of the two-month downward revision and weak September payroll growth points to a softer employment backdrop, although the Fed's primary focus remains on inflation and officials are still likely to characterise the labour market as at or close to full employment. The September CPI report on October 14th will therefore be key in shaping Fed rate expectations. Even with Williams, Bowman and Jefferson signalling support for patience in October, there remains scope for hawkish dissent, particularly from Logan following her remarks overnight.

Elsewhere, oil and diesel prices were lower following coordinated European measures to release diesel stocks and alleviate ongoing supply concerns.

Despite the combination of weaker labour data and lower energy prices, Treasuries struggled to sustain the initial rally. There was no obvious catalyst for the reversal, although some profit-taking/positioning following Thursday's sizeable Treasury rally may have played a role. More broadly, participants may require further evidence of a sustained deterioration in the labour market and/or easing inflation before pushing yields materially lower, particularly with inflation still above target and geopolitical and fiscal/issuance risks remaining in focus.

Supply

Notes

• US to sell USD 39bln 10yr notes on October 7th; to sell USD 58bln 3yr notes on October 6th; to sell USD 22bln 30 year bonds on October 8th; all to settle on October 15th

Bills

• US sold 4-week bills at a high rate of 3.890%, B/C 2.83x; sold 8-week bills at 3.990%, B/C 2.70x
• US to sell USD 95bln 13-week bills and USD 82bln 26-week bills on October 5th; to sell USD 95bln of 6-week bills on October 6th; all to settle on October 8th

STIRS / OPERATIONS

• Fed Hike Pricing via CME FedWatch: Oct 5.7bps (prev. 6bps), Dec 25.9bps (prev. 24.8bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 120bln (prev. USD 83bln) on October 1st
• SOFR at 3.87% (prev. 3.90%), volumes at USD 3.067tln (prev. USD 3.23tln) on October 1st
• NY Fed RRP op demand at 1.051bln (prev. 0.35bln) across 3 counterparties (prev. 1) on October 2nd

CRUDE

WTI (X6) SETTLED USD 1.76 LOWER AT USD 91.11/BBL; BRENT (Z6) SETTLED USD 0.06 LOWER AT USD 102.25/BBL

Brent ended the final trading session of the week little changed, while WTI was lower. Initially, benchmarks were pressured by reports that France proposed releasing 50mln bbls of diesel from Europe alongside 50mln bbls of crude across IEA members, conditional on the US refraining from a unilateral diesel export ban. Moreover, WTI and Brent fell to lows of USD 88.06/bbl and USD 95.12/bbl, respectively, following French President Macron confirming that diesel and crude stocks would be released over 4 months and G7 leaders confirming the release of up to 100mln barrels of oil and diesel stocks. However, after the aforementioned troughs were hit, benchmarks reversed, with Brent even paring losses, on no clear headline driver heading into weekend trade. For the record, in the weekly Baker Hughes rig count, oil was up 1 at 456, natgas down 2 to 133, leaving the total down 1 at 598. Over the weekend, participants will be awaiting any further updates from the Middle Eastern situation.

EQUITIES

CLOSES: SPX +0.73% at 7,723, NDX +1.00% at 30,808, DJI +0.49% at 51,182, RUT +0.94% at 2,833

SECTORS: Health -0.03%, Financials +0.01%, Energy +0.24%, Utilities +0.37%, Real estate +0.38%, Consumer staples +0.16%, Industrials +0.78%, Communication services +0.88%, Materials +0.98%, Technology +1.06%, Consumer discretionary +1.38%.

EUROPEAN CLOSES: Euro Stoxx 50 +1.07% at 6,242, Dax 40 +1.13% at 25,222, FTSE 100 +0.32% at 10,462, CAC 40 +0.79% at 7,897, FTSE MIB +0.49% at 50,483, IBEX 35 +0.42% at 19,085, PSI -0.63% at 9,417, SMI +0.28% at 13,661, AEX +1.28% at 1,117

STOCK SPECIFICS:

• Toshiba to double AI data centre HDD capacity by FY27
• Vylor (VYLR) will join SPX on Oct. 1st
• Twilio (TWLO) will join SPX on Oct. 6th
• Moderna (MRNA) will join NDX BMO on Oct. 9th
• Nike (NKE) rev. light & sees FY sales decline w/ weakness in Greater China, sportswear & Jordan Brand; restructuring plans & further layoffs added to concerns.
• ON Semiconductor (ON) agreed to acquire Synaptics (SYNA) for $123/shr in cash; ON expects immediate accretion to adj. EPS.
• Amazon (AMZN) seeks to offload & lease back c. $8bln of NVDA Grace Blackwell chips.
• Tesla (TSLA) Q3 total deliveries 486,532 (exp. 456,896); Q3 total production 464,391 (exp. 486,761)
• Rivian (RIVN) reaffirmed its 2026 delivery range guidance of 65,000 - 70,000; delivered a record 19,248 vehicles in Q3 (exp. 18,001 vehicles).
• Hunterbrook short Lennar (LEN) and Millrose Properties (MRP).
• US reportedly to offer USD 4bln loan to Vistra (VST) to support nuclear production.

FX

DXY was only slightly weaker after a softer-than-expected NFP reading as money markets still priced one 25bps rate hike by year end. Employment growth was 29k, shy of the expected 90k, accompanied by 60k negative revisions to the prior reading, and an unemployment rate ticking up to 4.2%. One data point does not mark a trend, is the likely response from the Fed hawks, and with an unemployment rate that stands close to full employment, means the focus has and will remain on the inflation mandate. As such, the initial dovish reaction faded with the reversal higher in US yields allowing the dollar to rebound. Recent dovish Fed speak (Williams, Jefferson, Bowman) and a soft PCE report has seen an October hike look less likely. 2026 Voter Logan sees at least an additional 50bps of tightening to fulfill the Fed's inflation target, effectively reducing the risk management cuts we saw last year amid labour market concerns. DXY hit lows on NFP of 101.668, albeit remains firmer for the third consecutive week, back at May 2025 levels.

G10 FX strength was led by the GBP, AUD, and CHF. Meanwhile, CAD underperformed amid the backdrop of lower energy prices, as next week's labour report is eyed. Oxford Economics expects the Canadian economy to continue struggling to create jobs in the near term as mounting headwinds from new US-Canada tariffs, greater uncertainty from an escalation in the trade war, the ongoing Iran conflict and a shrinking population weigh on hiring. USD/CAD is now hovering around the YTD highs of 1.42629.

EUR saw modest strength, however, French fiscal issues are still at the forefront of minds. In the EU morning, EZ headline inflation Y/Y printed at 3.8% (exp. 3.6%, prev. 3.2%), and Services also rose from the prior. Pertinently, Core HICP moved only a touch higher to 2.2% (prev. 2.1%), which will be welcomed by policymakers, since there is still little evidence of second-round effects. Nonetheless, woes of rising inflation remain – and this data will only further cement calls for another hike later this year.