The Bond Market Stopped Listening to the Data

The jobs report on Friday was a shock. The economy added just 29,000 jobs in September against forecasts near 84,000. The two prior months were cut by another 60,000. Inflation came in cooler too. That is exactly the news that should pull long term interest rates down.

It did not. The 10 year Treasury yield closed the week at 5.28 percent, the highest since May 2002. The 30 year closed at 5.63 percent, the highest since June 2002. Bonds sold off through two soft reports in a row. When the bond market stops reacting to the data, something else is driving it, and that is the most important thing to understand heading into Monday.

The S&P 500 closed Friday at 7,723, down 21 points on the week. It is 1.2 percent below its record. It spent the week testing the floor, broke it for one day, and bounced hard on the jobs number. The market has not decided. This week it probably has to.

The Floor Broke for a Day. Gold Did What We Said. The Euro Did Not.

Last issue named 7,663 as the line the recovery had to hold, and said a close below it would open 7,636, then 7,595. Wednesday closed at 7,652, eleven points under the line, and Thursday dipped to 7,617. That reached the first target and fell short of the second. Then Friday bounced 56 points and the market finished back above 7,663. Scenario A, a grind into the record, never got started. The early tell was a close above 7,745 and it never came. So the bear scenario fired as written, but only barely, and it did not follow through. The honest grade is half right.

Gold was the cleanest call. We said a close below 4,273 would open 4,222 and then 4,133. Gold broke 4,273 on Monday, passed 4,222 the same day, and reached 4,143, ten dollars from the second target. The euro was the miss. We said about 39 pips of decline were left, to 1.1353, and that the move was nearly finished. It reached 1.1353 on Monday and then kept going another 133 pips to 1.1220. One more correction: we wrote that economists expected 100,000 jobs. The consensus was closer to 84,000.

Weak Data, Higher Yields

Start with the facts. The Fed's preferred inflation gauge rose 3.4 percent from a year ago, below the 3.7 percent expected. The core measure fell to 3.0 percent from 3.3. Part of that drop came from a change in how the government measures some prices, so it is softer than it looks. Then payrolls missed badly and unemployment rose to 4.2 percent. On paper, this was the most dovish week of data since the Fed started raising rates again.

Long term yields rose anyway, and they rose more than short term yields. When that happens on weak news, investors are asking to be paid more for lending over a long stretch of time. Large government deficits, a selloff in government bonds around the world, and a Brent price stuck above 100 dollars all feed it. For stocks, a 24 year high in borrowing costs that does not fall on bad news is the quiet risk.

The dollar told the same story. On Thursday the dollar index hit its highest level since April 2025. On Friday a terrible jobs number barely dented it. EUR/USD rallied only 68 pips off its low and gave most of it back. A currency that will not fall on a jobs miss this large has a strong bid underneath it. Gold paid the price. It fell 3.7 percent on the week to about 4,162, its second straight weekly loss, even with war headlines in the background. USD/JPY sits near 157.80, still firm.

Outside the United States, rates are still going up. Australia raised its rate to 4.60 percent last week, its highest in almost 15 years, and pointed to energy prices from the Middle East conflict. The Fed, Japan and Australia have all raised since mid September.

A Box, a Record, and a Late October Destination

The S&P 500 is in a box. The top is 7,782, the September 22 high. The bottom is 7,617, Thursday's low. Price closed at 7,723, near the middle. A close above 7,782 puts the record high at 7,817 back in play, with room to about 7,830. A close below 7,617 says the next leg is down. The average price of the last 50 days sits at 7,658, and every close last week held above it.

Below the box, the line that matters is 7,498. It has not moved in four weeks, and a close below it would say the advance since March has broken. Under that, the longer term picture keeps pointing to the same place. Several separate measures land in the 7,280 to 7,310 zone, and that is also where the average price of the last 200 days should sit by late October. That is about 5.5 percent below Friday's close.

There are two roads to that zone. On the first, the market runs to a marginal new record near 7,790 to 7,830 first and then reverses sharply. On the second, the top is already in at 7,782 and the slide starts from here. Either way, the timing windows point to a low in the last week of October. Until 7,498 breaks, the trend is still up, and the first road is the one the chart slightly favours this week.

Gold is close to finishing its decline. It sits at about 4,170 with sell-side liquidity just below at 4,143 and 4,154. The level we expect it to reach is 4,133. Below that, 4,083. Any bounce has to get through supply at 4,190 to 4,208. A close above 4,259, Friday's spike high, would say the low is already in. The euro is bouncing inside a larger decline. It sits at 1.1257, with resistance at 1.1323 and then 1.1344 to 1.1349. A close below 1.1220 says the decline has resumed.

The Peace Talks Stalled and More Ships Are Heading East

The chart already points to a pullback into late October. Geopolitics will not cause it. It is the story the market will use to follow through. Last week President Trump rejected Iran's seven day plan to reopen the Strait of Hormuz, and the United States ordered another aircraft carrier group and 9,000 to 10,000 more troops to the region. By late November three carriers will be near Iran, and Trump has said stronger strikes are possible after next month's elections.

Talks have not ended, and an American official called them constructive on Saturday. A real deal is the kind of news a market uses to rally off a low. A breakdown is the kind it uses to extend a decline. Watch physical crude too. Cargoes of Brent are trading above 120 dollars, about 18 dollars over the futures price, and the strait is still mostly closed. That gap feeds fuel costs and supports the dollar more than it supports gold right now.

A Light Week, Led by the Fed Minutes

Monday brings the service sector report, with a reading near 55 expected. Wednesday brings the minutes from the September meeting, when the Fed raised rates and most officials signalled another increase this year. Thursday brings weekly jobless claims. Friday brings consumer sentiment. Delta reports earnings, a direct read on what high fuel prices are doing to profits. Next Monday is Columbus Day, with bonds closed and stocks open. The next inflation report is October 14, and the Fed meets October 27 and 28.

Here is the if/then. If the minutes show several officials wanted to wait, the market will read them as confirmation that 29,000 jobs ended the hiking, and yields have a reason to ease. If they read hawkish, they land on a 10 year yield already at its highest since 2002. A hot prices number inside Monday's service report is the risk nobody is watching. The bond market has shown it will sell on almost anything, so the asymmetry favours caution.

Two Ways This Week Resolves

Scenario A, which the chart slightly favours. The market holds above 7,617 and pushes through 7,782 to tag or slightly clear the record at 7,817, topping somewhere between 7,790 and 7,830. That is a short trip, and it ends in the zone where a reversal is expected. A new record in the first half of October should be treated as a place to take profits, not a base to build on. The early tell is a close above 7,755, last Friday's high.

Scenario B. The market closes below 7,617, which says the top is already in at 7,782. That opens 7,595, the monthly floor, then 7,498. A close below 7,498 confirms the decline and puts the 7,280 to 7,310 zone in play for late October. Each step down adds weight: below 7,617 the bounce failed, below 7,595 the monthly floor failed, below 7,498 the advance since March is in question.

The counterweight to both. If the minutes and the service data come in soft and yields finally fall, the market has room to run past 7,830. The case for a late October low rests on rates staying high. If that changes, the outlook changes with it.

What to Do With This

Watch the box. Above 7,782, the record is in play. Below 7,617, the late October decline is in play. In between, wait.

Watch the 10 year. It is at 5.28 percent. If it keeps rising on soft news, stocks are running on borrowed time. If it finally falls, the pressure comes off.

Gold is close to a low, not at one. The level to watch is 4,133. A drop into it that reverses quickly is the setup for the next bounce. Chasing it lower from here is late.

The euro is bouncing inside a decline, and the dollar showed it will not give up ground easily. Resistance at 1.1323 to 1.1349 is where the bounce should stall.

A final thought. Last week the data gave the market every reason to relax, and the bond market refused. That is the clearest signal of the week. The calendar still points to the last week of October as the window where this gets settled. Until then, respect the box, and do not treat a new record as the start of something new.