Stocks Face Rate Hike Risks as Jobs Report Looms

The US stock market is holding near record levels, but investors are bracing for a potential shock from interest rates and inflation data. The S&P 500 index has hovered just below its mid-August peak, supported by technology and AI-linked stocks.

The Federal Reserve raised interest rates for the first time in three years to fight high inflation, and investors are watching reports on employment and inflation closely for signs of a sharper trajectory of rate hikes. A key inflation gauge will be released alongside the monthly employment report on October 2, which is expected to show growth of 100,000 jobs and an unemployment rate of 4.2%.

Matthew Maley, chief market strategist at Miller Tabak, warned that a continued march higher in Treasury yields could lead to broader weakness in the market. The 30-year Treasury yield has reached its highest level in over 20 years, and the benchmark 10-year yield has risen above 5%.