On October 2, the U.S. September non-farm payroll report delivered an unexpected "dovish punch" to the market.

In September, the increase in non-farm employment was only 29,000, far below the market expectation of 90,000, just one-third of the expected value; the unemployment rate rose from 4.1% to 4.2%; the average hourly wage year-on-year fell to 3.0%, with a month-on-month increase of only 0.1%. More notably, the historical data revisions: the August job additions were revised down from 162,000 to 133,000, and the July data was revised down by 31,000, turning into a net decrease—suggesting that the employment picture over the last three months is even weaker than what single-month data indicated.

After the data was released, market bets on a Fed rate hike in October suddenly cooled: a week prior, the probability of a rate hike was nearly 70%, which dropped to 13.8% on Friday, while the probability of no action in October rose to 86.2%.

However, the market's reaction is much more complex than just "cooling rate hike expectations and rising stock markets."

1. Collapse of rate hike bets, but U.S. Treasury yields remain resistant

After the non-farm data was released, the 10-year U.S. Treasury yield initially fell during the session but rebounded towards the end, closing around 5.28%. Just the day before (October 1), it had touched 5.342%, the highest level since April 2002—even after the decline, it still stood above 5%, within a historically high range.

This is a warning signal worth attention. Weak employment data depresses the probability of interest rate hikes but does not pull down long-term yields. Some institutional investment managers judge that, considering the resilience of the U.S. economy, the 10-year yield moving towards 5.5% to 6% is a credible possibility, and rising borrowing costs may suppress stock returns. The persistently high long-term yields indicate that market focus includes not only "will there be a rate hike" but also "how long will high rates be maintained." Even if the Fed halts rate hikes, as long as long-term yields do not fall, the valuation of high-valued assets may still come under pressure.

Changes in rate hike expectations also require precise understanding. Interest rate futures show that the probability of an October rate hike dropped from about 26% before the data release to 13.8%, but the probability of a further 25 basis point increase in December remains as high as 63.1%, indicating that the market is not fully pricing in "one more complete rate hike this year." Goldman Sachs has pushed back the timing of the Fed's next rate hike from October; New York Fed President Williams stated that there is no rush for further action after the September hike, but perhaps another hike later this year would be appropriate.

In other words: the rate hike has not exited the table, just postponed.

2. Divergence in technology and semiconductors: The AI narrative continues, while traditional cycles lag behind

After the release of non-farm data, U.S. stock index futures experienced a short-term surge, further trading on the main logic of “soft landing of the economy, rate hikes delayed.” On Friday, the Dow rose 0.49% to close at 51,176.96 points, the S&P 500 increased by 0.73% to 7,722.72 points, the Nasdaq surged 1.19% to 27,190.86 points, reaching a new record high during the session; the Wande Index of the seven U.S. tech giants rose 1.37%, Tesla soared 4.65% due to third-quarter deliveries exceeding expectations, and Nvidia closed up 1.34%, touching $237.88 during the session, marking a historic high, with a market capitalization once again hitting $5.7 trillion.

However, the internal divergence within sectors is more informative than the index itself.

The AI industry chain continues to lead: the optical communication sector maintained its strength from the previous day, with Coherent rising by 5.59%, and Ciena increasing by 3.22%—just on October 1, Coherent had surged 10.90% in a single day, and the Philadelphia Semiconductor Index rose by 1.59% overall. In contrast, the memory sector started to lag: Micron Technology fell by 2.05% on Friday, contrasting with the previous day's increase of 3.03%; traditional cyclical and value sectors also remained weak, with equal-weighted indices like the S&P 500 performing worse than weighted indices, and most of the 11 sectors showing weak trends. While indices rose, the upward momentum remained mainly concentrated on a few AI leadership lines.

3. The same data, divergent answers across assets

The impact of the non-farm data on various assets displayed a clear directional difference.

Bitcoin briefly broke above $87,000 after the data was released, with an intraday increase of more than 3%, fluctuating widely throughout the day between approximately $83,700 and $87,200, and reported around $86,600 in the morning of October 5. The area between $87,000 and $87,500 has been tested multiple times by the market, and whether it can effectively break through remains uncertain and may be affected by next week's risk preferences.

Gold, on the other hand, performed a rollercoaster ride: after the non-farm announcement, spot gold surged over 1%, peaking above $4,200, but could not maintain the momentum, closing at $4,140.09, a decline of 0.89% for the day, while COMEX gold futures closed at $4,172.1. On the previous trading day (October 1), gold prices also soared to $4,218 before plummeting. Since late August, gold prices have cumulatively fallen over 10%. The suppressing factors are clear: a strong dollar and high U.S. Treasury yields have outweighed the positive impact of the employment data; some institutions analyze that short-term precious metals will mainly oscillate, waiting for a clearer monetary policy path.

Oil prices fell sharply on Friday: the G7 announced the release of 100 million barrels of strategic oil reserves, combined with a recovery in Middle Eastern oil exports, WTI fell by more than 4% at one point during the session, closing at $91.11 per barrel (about -1.9%), while Brent dipped below $100, ending around $99.9 (about -2.4%). However, the U.S. continues to send aircraft carriers and troops to the Middle East and urges allies to accelerate the release of diesel reserves, indicating that geopolitical premiums have not completely dissipated—part of the drop in oil prices is supply-related, while the part that does not drop is linked to risk.

The U.S. Dollar Index rose above 102.2 at one point this week, reaching the highest level since April 2025, and fell slightly to around 101.9 on Friday, but still maintained an upward trend for the week, with the dollar against the euro reaching a 17-month high. A strong dollar poses additional resistance to rebounds in gold and emerging market assets.

4. What to watch this week: three verification points

First verification point: ISM Services PMI (Monday). This is the first heavyweight data of the week. If the services sector's economic sentiment cools and the price index falls, it may further solidify expectations of "the peak of high rates"; if services sector inflation is stickier than expected, it may again drive expectations of tightening and put pressure on technology stock valuations.

Second verification point: FOMC Meeting Minutes (Wednesday). The Fed raised rates by 25 basis points to a range of 3.75%-4.00% in September, and the key in the minutes is how strong the committee's internal consensus is on "maintaining high rates for a long time." If more officials lean towards "no further action this year," it could provide short-term support for high-valued tech stocks; if the minutes indicate that the committee remains vigilant about sticky inflation, pressure on long-term yields may persist.

Third verification point: September CPI and oil price trends. Before the interest rate meeting in late October, the September CPI is the last critical puzzle piece; as oil prices have fluctuated significantly recently, OPEC+ decided on October 4 to maintain the November production targets unchanged. Subsequent production policies and oil price trends may still impact energy prices and inflation expectations, becoming one of the factors for the market to assess the December interest rate path.

The disappointing non-farm data has pushed October rate hike bets off the table, but the warning signal from U.S. Treasuries at 5.34% has not been lifted. Weak employment has lowered the probability of a rate hike but has not significantly impacted long-term yields—this contradiction may be one of the important variables affecting technology stock valuations going forward.

Data Note: Market data as of the close of U.S. stocks on October 2, 2026 (U.S. Treasuries and commodities as of October 2 close, Bitcoin as of morning quote on October 5); non-farm employment data from the U.S. Bureau of Labor Statistics released on October 2, historical series from FRED; rate hike probabilities from CME FedWatch; stock indices and individual stock price changes as of the close on October 2 (sector data for October 1 is based on the previous trading day's close). 

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