November 6, 2026
October’s stronger-than-expected employment report challenged the view that the labor market was stalling in late summer. Employers added 165,000 jobs in October, more than double economists’ expectations, while upward revisions to the prior two months reinforced the improvement in hiring. Job growth was broad-based, led by a sharp increase in professional and business services, with additional gains in health care, transportation, and manufacturing. The unemployment rate edged lower to 4.1% from 4.2%. Other labor market indicators were also encouraging, with job openings reaching their highest level since May and initial jobless claims falling to their lowest level since July. Taken together, the data suggest the labor market remains on solid footing, easing concerns about a more pronounced slowdown.
Consistent with the stronger labor market, the University of Michigan’s consumer sentiment increased over 6% from the prior month while households lowered their one-year inflation expectations to 4.3% from 4.7% in the preliminary November survey, though both remain above February levels. The ISM manufacturing index improved to 55.5, a three-month high, while the ISM services index decreased 0.5 points from the prior month to 54.5. Both ISM manufacturing and services cited tariffs, higher prices and uncertainty around fuel prices as headwinds. Third-quarter productivity grew at a 3.6% annualized pace and unit labor costs declined to -0.7%, suggesting productivity gains are helping offset higher labor costs and limit inflationary pressures.
As investors weighed the midterm election results, weakness in technology stocks and declining oil prices drove demand for Treasuries, pushing yields lower. Crude slid amid hopes of de-escalation with Iran. Weak chip earnings and concerns about slower data-center construction gave the S&P 500 its worst day since April 2025 on Thursday, as investors reduced exposure to stocks tied to AI. As of this writing, the S&P 500 stood at 7,402, down 1.98% for the week. West Texas Intermediate crude fell 15% on the week to $90.55, while gold rose 4.69% to $4,087.27. The 2-year Treasury yield stood at 4.52%, down 0.07% on the week, and the 10-year Treasury yield stood at 4.86%, also down 0.07%. The 2-year to 10-year spread held at 34 basis points.
Futures pricing reflected a higher probability of a Federal Reserve (Fed) rate increase in December following the employment report. Chandler expects two more quarter-point increases in the next six months, at the December 2026 meeting and a meeting in early 2027. October’s stronger hiring supports that outlook, though lower oil prices, lower inflation expectations and falling labor costs give the Fed some flexibility to wait. We expect the curve steepening gradually as solid growth lifts longer term yields. Next week’s $125 billion of Treasury auctions will provide another indication of investor demand. Chandler continues to maintain a disciplined approach to portfolio management, prioritizing credit quality and liquidity while actively managing duration.
Next Week: Consumer Price Index, Producer Price Index, Existing Home Sales, NFIB Small Business Optimism
Written by Kara Hooks, CTP, Portfolio Strategist