A 29,000-job September meets a Fed that just restarted hiking
The Fed's first hike of a new cycle came just over two weeks before a weak payrolls print. History after first hikes is mixed for stocks over a month.
What happened
The Federal Reserve raised its target range to 3.75% to 4.00% on September 16 in a 12-0 vote. On October 2 the September jobs report showed payrolls up just 29,000, with July revised to -10,000, and the unemployment rate remained at 4.2%. New York Fed President John Williams said there is no need for urgency and that one more increase may be appropriate late this year. Market pricing for an October hike fell to about 18%.
- The Federal Reserve raised the federal funds target range by a quarter point to 3.75% to 4.00% on September 16, 2026, in a 12-0 vote.
- US nonfarm payrolls rose by 29,000 in September 2026 and the unemployment rate remained at 4.2%. July was revised to -10,000 and August to 133,000.
- New York Fed President John Williams said on September 29 there is no need for urgency and that one more increase may be appropriate late this year.
- After the soft jobs data, market pricing put the odds of an October Fed hike at about 18%.
- US consumer prices rose 0.4% in August and 3.4% over the year. The September CPI report is scheduled for October 14.
- The next FOMC meetings are scheduled for October 27-28 and December 8-9, 2026.
Why it matters
A central bank that is still raising rates while hiring stalls is an unusual mix. The two-year yield carries most of the policy expectation, so it is the first place a shift in the Fed's path shows up. The September CPI report on October 14 is the next big input before the October 27-28 meeting.
What history shows
Our data marks the September 16 move as the first hike after a run of cuts. Across 6 first hikes since 1994, the S&P 500 moved +0.46% on average on the day and -1.88% over the next 20 trading days, rising in 33% of cases.
Across all 51 hikes, the S&P 500's average 20-day move was -0.08% and the two-year yield moved +9 bp. The sample of first hikes is small, so treat it as context.
Seasonal backdrop
October has been a volatile month for US stocks: the S&P 500 has the largest average absolute monthly move of any month in our data (4.28% since 1928), with an average return of +0.55% and gains in 59% of years.
Markets in this insight
| Market | Last | Day | 1 month | Year to date | Oct average | Oct pattern |
|---|---|---|---|---|---|---|
| S&P 500 | 7,818.93 | +0.58% | +1.30% | +14.22% | +0.55% | no clear pattern |
| US 2-year Treasury yield | 4.84% | +1 bp | +47 bp | +137 bp | -5 bp | no clear pattern |
| US 10-year Treasury yield | 5.31% | +3 bp | +53 bp | +113 bp | -1 bp | no clear pattern |
| US dollar index (DXY) | 101.83 | -0.33% | +2.69% | +3.61% | -0.01% | no clear pattern |
| Gold | 4,187.10 | +0.73% | -6.47% | -3.55% | +0.13% | no clear pattern |
| Bitcoin | 85,557.56 | -0.27% | +6.48% | -2.23% | +16.63% | strong |
Scenarios
Pause and wait
A soft CPI on October 14 confirms the jobs slowdown and the Fed holds at the October meeting, keeping the option of a December move open.
- Core CPI month-on-month at or below the August pace
- Fed speakers repeat that there is no urgency
Second hike priced back in
A hot CPI print outweighs the jobs data and markets price another hike by December.
- Headline CPI above the August annual rate
- Two-year yield rising faster than the ten-year
Growth scare
Weekly jobless claims and revisions point to a sharper slowdown and the market starts pricing cuts in 2027, pulling yields lower across the curve.
- Rising jobless claims
- Downward revisions to earlier payrolls
What to watch
- October 7: minutes of the September FOMC meeting
- October 14: September CPI
- October 27-28: FOMC meeting