Fed Hike Bets Fall After Weak US Jobs Report

Weaker US jobs data has sharply reduced expectations for an October Fed rate hike. Investors have gained some relief, but high Treasury yields and the approaching earnings season remain tests for stocks.

The outlook for US interest rates shifted sharply after September’s jobs report showed slower hiring and substantial downward revisions to earlier figures.

Investors now see an 18% chance of a Federal Reserve rate increase in October, down from 64% last week. That change has eased some pressure on stocks, particularly companies whose valuations are sensitive to borrowing costs.

Relief has limits

A pause this month would give investors room to focus on corporate earnings. It would not remove the challenge posed by high bond yields. The benchmark 10-year Treasury yield remained above 5.2% on Monday morning, offering an attractive alternative to shares and keeping financing costs elevated.

For US investors, the next test is whether companies can deliver earnings strong enough to support share prices at these interest-rate levels. Softer jobs data may have reduced the odds of an immediate hike, but it also raises questions about the strength of the economy.