The US added 29,000 jobs in September (the net monthly gain). Depending on the source, economists had expected 85,000 to 90,000, so the result was about a third of that. The unemployment rate also rose from 4.1% to 4.2%. Yet on Oct. 2 (US time), the day the number came out, the Nasdaq-100, an index of 100 of the largest non-financial companies listed on Nasdaq, rose 1.0% and closed at a record high.
The usual explanation is that bad news is good news because the Fed won't raise rates. That is half right. But it leaves three things unexplained: why 29,000 wasn't read as a recession warning, who led the rally, and why the bond market moved the other way on the same day.
- What is 29,000 being compared with?
29,000 is the number of jobs added in September, according to the monthly jobs report from the US Labor Department. August's gain was also revised down, from an initial 162,000 to 133,000.
The timing is what makes this number matter. On Sept. 16, the Federal Reserve (the Fed), America's central bank, raised its benchmark rate by 0.25 percentage points to a range of 3.75% to 4.00%. It was the first hike since 2023. Oil prices that surged because of the Iran war were one of the main reasons inflation climbed to 3.4% in August.
- When the Fed is hiking, a weak jobs report can be welcome news
If the Fed were cutting rates, a jobs shock would be a warning that the economy is turning down. When it is raising rates, the same news can read differently. Fewer new jobs means the economy is cooling, and a cooling economy means the Fed can raise rates less.
The odds of another hike in October, calculated from interest-rate futures prices (CME FedWatch), were 64% a week earlier and 24% the day before the report. Most of the decline happened before the jobs report came out. On the day of the report, the odds fell further, to 16% to 20% depending on the source.
Economist Mohamed El-Erian said the demand side of the labor market was "flashing yellow" and that it would put the Fed "definitely on hold for October." When rates rise less, companies' borrowing costs are lighter, and tech stocks, whose value rests on profits far in the future, get marked down less. The Nasdaq Composite, which includes every stock listed on Nasdaq, rose 1.2% that day.
- 29,000 may not be as bad as it looks
In the past, the US was thought to need about 200,000 new jobs a month to keep the unemployment rate steady. This number is called break-even job growth. Analysts now say break-even has shrunk, because a sharp drop in immigration and retiring baby boomers mean the pool of workers is growing more slowly.
Torsten Slok, chief economist at US investment firm Apollo, puts break-even close to zero. Joe Brusuelas, chief economist at US consulting firm RSM, puts it at about 35,000 a month. The estimates span a wide range, from 0 to 35,000, but either way 29,000 looks closer to break-even than to a recession warning.
The rise in unemployment wasn't all bad news, either. The share of people working or looking for work (the labor force participation rate) rose from 61.6% to 61.8%. When more people start looking for jobs, the unemployment rate can rise along with it.
- Big growth stocks led the rally
Looking at the day's moves, the Nasdaq Composite led with a 1.2% gain and the Nasdaq-100 rose 1.0%. The Russell 2000, an index of 2,000 smaller companies, gained 0.9%, the S&P 500 rose 0.7% and the Dow rose 0.5%. The equal-weighted S&P 500, which gives all 500 stocks the same weight, rose 0.3%.
Put simply, big tech and growth stocks led, and the size of the gains varied by index. Meanwhile, on the Nasdaq, more stocks hit 52-week lows than 52-week highs for the 25th straight trading day. When a similar 43-day streak ended on April 22, 2025, the Nasdaq Composite was 19.2% below its record. This time is different because the index is near a record.
One of the leaders was Nvidia, the top AI chip company. It hit an all-time intraday high of $237.87, and its market value was $5.72 trillion during the session and about $5.64 trillion at the close. The stock is back at its May record, but its latest quarterly revenue, reported two quarters later, is 41% higher than the quarter that had been reported back in May. As a result, its price-to-earnings ratio on adjusted earnings (profits excluding one-off items) has fallen from about 51 to 34.
- The bond market moved the other way
Two different interest rates are involved here. One is the benchmark rate set by the Fed. The other is the 10-year Treasury yield, which is set by trading in the market every day. When the 10-year yield rises, rates on long-term loans such as mortgages tend to follow, and future profits are discounted more heavily when converted to today's value, which weighs on stocks.
The 10-year Treasury yield dipped to 5.18% right after the report, then reversed and closed at 5.28%. That was 0.04 percentage points higher than the day before and 0.02 percentage points from the highest close since 2002. A rising Treasury yield means the prices of existing Treasury bonds are falling.
Expected rate hikes through the end of 2027 also shrank to 0.74 percentage points during the session, then grew back to 0.89 percentage points by the close. That is still lower than the nearly 1 percentage point priced a week earlier. Hourly wages in September were up 3% from a year earlier, below August's 3.4% inflation rate, and US diesel averaged $6.37 a gallon that day.
Stocks reacted to hopes for a hold in October, while bonds reacted with a rebound in long-term yields. The reason for the split isn't clear. One market analyst wrote that there was "no obvious catalyst."
- BITPRESS Insight
This time, the "bad news is good news" formula worked in the stock market. The Fed was in the middle of raising rates, and 29,000 was within the range of break-even estimates (0 to 35,000), so it could be read as a sign of a cooling economy rather than a recession warning.
Still, the Nasdaq-100's record did not mean a broad rise across US stocks. Big growth stocks led the gains, and long-term yields actually closed higher. It was a day when stocks and bonds moved differently on the same jobs number.
The next time a jobs number comes in weaker than expected, you can check three things in order: Is the Fed raising rates right now? Are the job gains within break-even estimates? Did the 10-year Treasury yield fall too? This time only the first two were yes, and stocks rose while bonds didn't follow.
Sources
https://finance.yahoo.com/economy/live/september-jobs-report-live-updates-labor-market-124648123.html
https://finance.yahoo.com/markets/live/stock-market-today-friday-october-2-dow-sp-500-nasdaq-september-jobs-report-080623878.html
https://pro.thestreet.com/market-commentary/bad-news-was-good-news-friday-for-stocks-not-bonds
https://www.nbcnews.com/business/economy/fed-raises-rates-defying-trump-rcna598148
https://www.fool.com/investing/2026/10/02/nvidia-stock-is-back-at-its-may-record-its-quarterly-revenue-is-41-higher/
https://thewallstreetrepublic.substack.com/p/nvidia-hits-a-fresh-high-near-6-trillion
https://investinglive.com/news/investinglive-americas-fx-news-wrap-2-oct-nasdaq-100-closes-at-a-record-after-soft-us-jobs-treasury-yields-reverse-higher/
Glossary
Jobs report (nonfarm payrolls) — A monthly report the US Labor Department releases around the first Friday of each month, showing how many non-farm jobs were added that month and the unemployment rate.
Break-even job growth — The number of jobs the economy must add each month to keep the unemployment rate from rising or falling; it gets smaller when the pool of workers grows more slowly.
Nasdaq100 — An index of 100 of the largest non-financial companies listed on the Nasdaq market, different from the Nasdaq Composite, which includes every Nasdaq-listed stock.
CME FedWatch — A tool that uses US interest-rate futures prices to calculate the odds that the Fed will change rates at its next meeting.
P/E ratio (price-to-earnings ratio) — A stock's price divided by its annual earnings per share; the lower it is, the cheaper the stock is relative to its earnings.
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