THIS WEEK IN REVIEW:
Sept. 7 - Oct. 3, 2026 Yields climbed, jobs missed — but stocks rallied anyway

Yields keep climbing

The bond market rout that started two weeks ago spilled over into last week. Oil prices declined from the mid-$90s to below $90 per barrel as Strait of Hormuz traffic seems to be picking up without any type of resolution to the Iran conflict. It appears Iran’s ability to disrupt traffic in the Strait has been degraded to the point where shippers aren’t as fearful as they were to risk the passage.

One would think the freer-flowing oil would have eased some inflationary fears and yields would have subsided — but that’s not been the case so far. Yields continued to grind higher as the 10-year U.S. Treasury topped 5.3% (its highest point in nearly 25 years) and the average fixed 30-year mortgage climbed above 7.3%.

It seems the latest inflationary scare has stirred a much deeper problem: our $40 trillion debt and persistent budget deficit. We now pay $1.1 trillion to service our national debt.

Interest costs matter because every dollar spent servicing debt is a dollar not available for other priorities. The size of the debt reflects years of federal spending exceeding revenue. Rising Treasury yields suggest investors are asking for higher compensation to hold government debt, which in turn raises borrowing costs for the government.

It’s a problem that doesn’t have an easy solution, especially since policymakers can’t agree on how to go about tackling it. The lack of certainty currently has bond yields in an upward spiral without a clear answer on where they’ll stop.

Jobs miss expectations, markets rally!

The jobs picture has been erratic for a while now. We’re up one month and down the next. We exceeded expectations in August, then missed them in September.

The erratic data seems to have begun when the former Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer was fired by President Donald Trump in August 2025. “Manipulating jobs data” was the given reason for her firing, whether that was true or not. Then there was the government shutdown at the end of 2025, and no data was forthcoming at all.

It’s been a good while since we’ve seen a consistent trend with respect to jobs. There’s not much firing going on, but there seems to be much less hiring. There was the immense hype of all the World Cup hiring that turned out to be a bust, then a rebound for no apparent reason. I’m not intimating something nefarious is going on just because a bureaucrat was fired or data was delayed due to the shutdown. Maybe it’s because people aren’t replying to the survey in the numbers they used to or there really is a problem with the jobs market.

Back to the numbers. We were told jobs were solid and so long as jobs remained robust, the economy was in fine shape. Well, in September we were expected to rise by 85,000 nonfarm payroll jobs, but we came in at just 29,000. Plus, unemployment ticked up from 4.1% to 4.2%. We still saw positive growth, but it’s much less robust than August’s gain of 133,000.

Maybe the ADP employment report has become a better, more consistent measure. The latest ADP numbers showed a gain of 90,000 jobs versus expectations of 70,000. Last month it was a muted gain of 38,000 jobs, below the forecast of 48,000. This makes sense since August is a slow hiring month. We have yet to see a negative report from ADP this year.

Regardless of where our data comes from, for now the market appears to still lean toward the BLS employment situation. For the moment, the weak jobs number swung the odds of an October rate hike from the Federal Reserve from yes to no in a heartbeat. After a rugged week, thanks to the increasing yields discussed above, markets rallied on Friday. The S&P 500 rose back over 7,700, the Dow climbed back over 51,000 and Nasdaq popped over 27,000. The 10-year cooled a bit to below 5.2% — but that’s still alarmingly high!

It was nice to end the week on an uptick for a change, but let’s not kid ourselves. The same problems (inflation, the deficit, Iran, our $40 trillion debt and the price of oil) haven’t gone away and are likely to stick around for a while.