A week filled with significant events impacting the markets culminated in an unexpectedly strong September jobs report.

Government Shutdown Averted; House Ousts McCarthy: The U.S. Congress managed to avoid a dramatic government shutdown just hours before the midnight deadline Oct. 1 by passing a stopgap funding bill. This bill ensures the continuation of government operations through Nov. 17, excluding new funding for border security and Ukraine. On Tuesday, the House of Representatives made a historic decision to oust Speaker Kevin McCarthy, following a motion initiated by Rep. Matt Gaetz (R-FL) in response to McCarthy’s collaboration with Democrats to prevent a government shutdown.

Treasury Yields Surge, Bond Market Turmoil Persists: Throughout the week, yields across the Treasury curve continued to rise. The 10-year Treasury yield surged past 4.75%, reaching its highest level in 16 years. On Friday, the 30-year yield crossed the 5% threshold, driven by a jobs report that exceeded expectations. Funds and ETFs investing in long-dated Treasury bonds such as the PIMCO 25 Year Zero Coupon U.S. Treasury Index Exchange-Traded Fund (NYSE:ZROZ) or the iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) have now lost more than 50% of their value since March 2020.

Non-Farm Payrolls Significantly Exceed Estimates, Indicating Strong Labor Market: The September jobs report showed stronger-than-anticipated employment growth. Non-farm payrolls increased by 337,000 last month, marking the largest monthly gain since January and far surpassing the expected 170,000. August NFPs were revised upward to 227,000, indicating a robust pace of hiring throughout late summer. As a result of the impressive jobs number, economists now see rising risks of further Federal Reserve tightening this quarter.

Exxon Mobil Eyes Acquisition Of Pioneer Natural Resources: Oil giant Exxon Mobil Corp. (NYSE XOM) is considering acquiring Pioneer Natural Resources Company (NYSE:PXD) to strengthen its position in the U.S. energy sector. The potential agreement could be valued at up to $60 billion, potentially making it the largest takeover in the world this year. Shares of the target company, Pioneer, rose by as much as 10% on Friday.

What to Watch in the Week Ahead: All eyes are on the Consumer Price Index report for September set to be released on Thursday. This report will mark the last crucial piece of economic data ahead of the Nov. 1 Fed meeting. Economists predict that the annual inflation rate will slightly ease from 3.7% to 3.6% in September, and core inflation is expected to fall from 4.3% to 4.1% on a year-over-year basis. 

Other relevant economic releases include the Producer Price Index report on Wednesday, where a monthly decline from 0.7% to 0.3% is expected, and the Michigan Consumer Sentiment estimate for October on Friday.

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