Much depends on the September jobs report

Yielding to high yields
The 10-year Treasury yield hit 4.8% Tuesday, a 16-year high. It’s since dropped about eight basis points, but remains at an elevated level. That’s bad news for investors and consumers because the 10-year yield influences everything from corporate financing, to mortgage rates, to currency valuations. And market watchers fear the yield could climb even higher.

Jobless claims inched up, but still low
U.S. jobless claims totaled a seasonally adjusted 207,000 for the week ended Sept. 30. That’s below the expected 210,000 and just 2,000 more than the previous week, adding to worries the jobs market isn’t loosening — which could prompt the Federal Reserve to continue tightening monetary policy.

Potential of another European war
Tensions between Serbia and Kosovo have heightened in recent weeks. Northern Kosovo, which borders Serbia and comprises an ethnic Serb majority, was rocked by violence in late September. Serbia responded with a military buildup along the border. Analysts are concerned a full-blown armed conflict could erupt in another part of Europe while the world’s still distracted by the war in Ukraine.

[PRO] Bond king’s not keen on bonds
Bond king Bill Gross isn’t so keen on bonds — and neither is he hot on stocks. That isn’t really a surprise, given the surge in U.S. Treasury yields and the September slump in stocks. But Gross still has his eyes on a few opportunities in markets now.

A quiet day in markets. But trading on Thursday was more akin to being in the eye of a storm rather than relaxing amid a spell of calm weather.

Trading volume was subdued as well. The SPDR S&P 500 traded 70.1 million shares, below its 30-day average of 80.1 million. Likewise, the Invesco QQQ (which tracks the Nasdaq 100 index) traded around 4 million shares below its average.

Why the muted activity Thursday? Investors are bracing for the storm that is the September jobs report. Jobs data released this week have so far given a mixed picture of the U.S. labor market. The JOLTS report suggested a still-tight jobs market, the ADP payrolls report put that worry to rest slightly, while the jobless claims report was equivocal, showing a tick upward in unemployment claims — but just the smallest increase.

With such contrary signals, the Labor Department’s jobs report will be the key factor in determining whether markets remain stormy. Economists surveyed by Dow Jones expect 170,000 new jobs for September. But some banks are expecting the number to be higher. Goldman Sachs‘ forecasting jobs growth of 200,000, while Citigroup thinks it’ll be 240,000.

If the jobs report skews toward the hotter side — as those banks expect — “you can very easily put a November rate hike back on the table,” UBS chief economist Jonathan Pingle said Thursday on CNBC.

That, in turn, would push Treasury yields up even more and potentially trigger another sell-off in stocks. Then something else might break, said Bob Michele, global head of fixed income for JPMorgan Chase’s asset management division, increasing chances of a recession.

It’s a long line of conjecture, admittedly. But that’s just to show, given the volatility of markets now, how much hinges on the September jobs report.