US Stocks Rally as Weak Jobs Data Cools Fed Rate Hike Bets; Nasdaq Hits Record High

New York, Oct. 2, 2026 — U.S. stocks closed higher on Friday, with the Nasdaq Composite surging to an intraday record high, after a surprisingly weak September jobs report eased investor fears that the Federal Reserve would raise interest rates again this month.

The S&P 500 climbed 56.27 points, or 0.7%, to close at 7,722.72, pulling within 1% of its all-time high . The Dow Jones Industrial Average added 250.40 points, or 0.5%, to 51,176.96 . The tech-heavy Nasdaq Composite rallied 319.27 points, or 1.2%, to 27,190.86, reaching a record high during the session . The Russell 2000 index of smaller companies rose 0.9% to 2,832.90 .

Despite Friday’s gains, all three major indexes posted weekly losses: the S&P 500 fell 0.3%, the Dow dropped 1.3%, and the Nasdaq edged up 0.5% for the week .

Why Did the Stock Market Rise Today?

The primary catalyst was the September nonfarm payrolls report, which showed U.S. employers added just 29,000 jobs last month, far below the consensus estimate of 89,000 . The unemployment rate rose to 4.2%, above expectations of 4.1% . Average hourly earnings increased just 0.1% month-over-month, also missing forecasts .

The weak data prompted traders to sharply reduce bets on another Fed rate hike. According to the CME FedWatch Tool, the probability of a 25-basis-point increase at the October 28 meeting fell to roughly 20%, down from about 64% a week earlier .

“This is exactly the kind of result the market wanted from the labor market perspective,” said Phil Blancato, chief market strategist at Osaic. “Neither too hot, nor too cold” .

Seema Shah of Principal Asset Management noted: “The weaker jobs data, smaller wage growth, and higher unemployment rate indicate the labor market is cooling rather than re-accelerating” .

Treasury Yields Retreat from 24-Year Highs

The 10-year Treasury yield eased to around 5.21% after touching 5.344% earlier in the week — its highest level since April 2002 . The 30-year yield slipped to approximately 5.57% .

The pullback in yields provided relief for rate-sensitive sectors, particularly technology and growth stocks .

Which Sectors and Stocks Led the Rally?

Semiconductor stocks were among the biggest winners, with the Philadelphia Semiconductor Index gaining 3.1% . Nvidia rose 2.5% to an intraday record high, while Synopsys surged nearly 19% .

Tesla jumped more than 5% after reporting 486,532 vehicle deliveries in the third quarter, surpassing expectations of 461,000 . SpaceX climbed 5.5%, and Oracle added 3% .

Consumer discretionary was the top-performing S&P 500 sector, gaining 1.38%, followed by technology . Healthcare was the only sector to close lower, slipping 0.03%, as investors rotated out of defensive names .

Cruise stocks rallied after Carnival beat earnings expectations, lifting Norwegian Cruise Line and Royal Caribbean .

On the downside, Nike fell approximately 5.6% after the company forecast a significant decline in annual revenue and announced layoffs as part of a global restructuring .

Market Breadth and Volatility

The CBOE Volatility Index (VIX), known as Wall Street’s “fear gauge,” dropped 6.59% to 15.31, signaling reduced short-term anxiety .

Market breadth was positive: advancing stocks outnumbered decliners by a 3.27-to-1 ratio on the NYSE and 2.5-to-1 on the Nasdaq .

What’s Next for Investors?

Attention now shifts to the upcoming third-quarter earnings season, which begins next week with PepsiCo and Delta Air Lines, followed by major banks on October 13-14 . Early expectations point to approximately 28% earnings growth for the quarter .

Saira Malik of Nuveen believes the jobs report could support the market ahead of earnings season, potentially marking “the beginning of the Santa Claus rally everyone has been hoping for” .

However, some analysts remain cautious. Jeffrey Gundlach, CEO of DoubleLine Capital, warned that the U.S. stock market resembles “a tree that appears healthy on the outside but is rotten inside” . He noted that 80% of S&P 500 constituents have entered correction territory, down at least 10% from their 52-week highs, while 39% have fallen into bear market territory .

The Fed’s next policy decision is scheduled for October 28, with markets currently pricing in roughly even odds of no rate hike .