Stock Market Today: Stocks Pop After September Jobs Shocker

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Stocks opened lower Friday as a sizzling September jobs report caused Treasury yields to jump. However, the main indexes didn't stay in negative territory for long as bargain hunters swooped in.

Taking a closer look at this morning's nonfarm payrolls data shows the U.S. added 336,000 new jobs in September, nearly double what economists were expecting. The unemployment rate held steady at 3.8%, while average hourly earnings – a measure of inflation that's tracked by the Federal Reserve – were up 4.2% year-over-year, the slowest annual pace since June 2021.

Wall Street's top minds were quick to weigh in after the September jobs report, including Matt Peron, director of research at Janus Henderson Investors. The report "will keep rates higher for longer and challenges the equity market soft-landing narrative as well as valuations," Peron says. "We're still forecasting a slowdown, but persistent strong data in the service economy is certainly nudging the risk to the downside due to the potential of more aggressive policy."

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Rate hike expectations tick higher after jobs report

Indeed, the report muddies expectations of whether or not the Federal Reserve will raise interest rates again this year. According to CME Group, futures traders are pricing in a 29% chance for a quarter point rate hike at the next Fed meeting, up from 18% one week ago.

The data also sent Treasury yields spiking after two days of cooling off. The yield on the 2-year government bond jumped 6.7 basis points to 5.092%, while the yield on the 10-year note rose 8.1 basis points to 4.797%. (A basis point = 0.01%.)

Still, the main benchmarks managed to swing into positive territory mid-morning and they kept rising into the close. The Nasdaq Composite finished the session up 1.6% at 13,431, the S&P 500 was 1.2% higher at 4,307, and the Dow Jones Industrial Average added 0.9% to 33,407.

The two major events investors need to watch for

Looking ahead, there are two major events next week that could spark market volatility. One is Thursday morning's release of the September Consumer Price Index (CPI), one of the last major readings on inflation ahead of the Fed's November meeting.

BofA Securities economist Stephen Juneau thinks the September CPI will be "relatively firm," up 0.3% month-over-month – down from August's reading of 0.6%. The economist believes the monthly rise in core CPI, which excludes volatile energy and food prices, will stay unchanged at 0.3% amid a decline in used car prices.

Additionally, third-quarter earnings season gets underway, with air carrier Delta Air Lines (DAL) and big bank Wells Fargo (WFC) among those on the earnings calendar. Gina Bolvin, president of Bolvin Wealth Management Group, says she is expecting "a good earnings season and for long-term investors it may be a good opportunity to buy on dips."

With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at a local investment research firm. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.