• Nasdaq Composite hits record intraday high as megacap tech surges on reduced Fed rate-hike fears.
  • Softer September jobs data eases tightening concerns, but bond yields remain near multiyear highs.
  • Investors eye ISM services data and Fed minutes for clues on policy path amid inflation still above target.

U.S. equities extended their post-jobs-report rally on Thursday, with the Nasdaq Composite surging 1.00% to a record intraday level as investors slashed bets on another Federal Reserve rate increase this month. The technology-heavy index was buoyed by sharp gains in megacap growth stocks, while the S&P 500 also advanced and the Dow lagged.

The rally, which began after Friday’s softer-than-expected September employment report, gained momentum throughout the session. At 10:19 a.m. ET, the Nasdaq was up 0.62% at 27,360.28, but by midday it had pushed higher, reflecting continued appetite for rate-sensitive sectors. The S&P 500 rose 0.39% to 7,753.05, while the Dow Jones Industrial Average slipped 0.13%, underscoring a rotation into growth names.

Nvidia (NVDA) climbed 1.1%, hovering near a recent record, while Meta (META), Microsoft (MSFT), and Tesla (TSLA) each rose more than 1% in early trading. The moves came as investors interpreted the Labor Department’s report—showing payrolls grew by just 29,000 versus roughly 90,000 expected, and unemployment rose to 4.2%—as a sign that the Fed can afford to pause its tightening cycle. Markets had recently priced a high probability of an October hike, but after the data, odds fell sharply to around 20-25%, according to market commentary.

“The market’s core interpretation is ‘slower labor demand, less imminent Fed tightening,’” said one strategist, who asked not to be named. “That particularly supports technology and other long-duration equities because more of their projected earnings lie in the future and are therefore more sensitive to discount rates.”

Bond yields declined from their immediate post-data levels but remained near multiyear highs on October 5, a reminder that the rate outlook has not become fully accommodative. The Fed raised rates by 25 basis points in September to 3.75%–4.00%, citing still-elevated inflation, and officials have not declared victory. Chicago Fed President Austan Goolsbee said policymakers need more evidence that inflation is sustainably moving toward 2%, describing inflation as the larger policy concern despite a steady labor market.

Fragile Prospects

The rally’s durability hinges on upcoming data, starting with the September ISM services report and the release of the September FOMC minutes on October 7. Analysts expect the services index to improve to 55.7 from 55.4, but the prices-paid component will be closely watched after the manufacturing equivalent came in at 77.9, above expectations—an inflationary warning sign. Investors will also parse the Fed minutes for disagreement within the committee and guidance on whether the September hike was a one-off precaution or part of a broader tightening cycle.

The market’s advance follows a notable divergence in September: the Nasdaq gained 1.86% while the S&P 500 fell 0.45% and the Dow dropped 4.29%. That pattern suggests investors have continued to favor growth and AI-exposed companies even as the broader market struggled. Business investment tied to AI infrastructure has helped support economic growth, reinforcing demand for large AI-linked technology firms.

Still, the labor market’s cooling—while welcomed by equity investors—poses a risk if it shifts from “cooling” to “contraction.” A more patient Fed could eventually ease pressure on mortgage, auto-loan, and credit-card rates, but the same softer jobs data that buoyed shares also indicate slower hiring. “The risk in this pattern is that the data may eventually shift from ‘cooling’ to ‘contraction,’ at which point weaker economic numbers would no longer be supportive for stocks,” noted one market analyst.

Internationally, G7 plans to release 100 million barrels of emergency crude oil and diesel have been cited as a factor easing fuel-price pressure and helping lower yields. If effective, lower energy inflation could give the Fed more latitude to pause. However, if oil prices rebound, the inflation outlook could deteriorate again. The late-October Fed meeting also falls close to the U.S. midterm elections, increasing political sensitivity around inflation, borrowing costs, and gasoline prices.

Corporate earnings season will soon test whether stock prices—especially richly valued AI and megacap technology names—are backed by revenue growth. PepsiCo (PEP) and Delta (DAL) are among the early reports this week, with broader reporting activity accelerating afterward. The Fed’s own September projections imply inflation may remain above target into year-end, with median forecasts of 3.7% for headline PCE inflation, 3.4% for core PCE, and a 4.1% year-end federal-funds rate. That suggests the central bank may pause without necessarily turning dovish.

Overall, the headline signals confidence that the Fed can avoid an immediate additional rate hike without the economy slipping abruptly into recession. That is supportive for stocks in the near term, particularly the Nasdaq, but the durability of the move depends on upcoming inflation, services, earnings, and Fed-communication data.

Correction: An earlier version of this article misstated the S&P 500’s exact level at 10:19 a.m. ET. It was 7,753.05, not 7,735.05.