With inflation as high as 3.7%, the odds of a December rate hike are said to be 85%, yet on the day stocks fell, the 10-year yield actually dropped. Which jobs report outcome tonight is the most dangerous?
2026-11-06
Why falling yields are not reassuring
On 11-05 the 10-year yield fell -5.7bp to 4.837% and the 2-year fell more than 11bp to 4.466%. It is the result of money leaving stocks for bonds. Yields that fall because of risk aversion are not good news for growth stocks. They did not fall because hike expectations eased. The Fed held on 10-28, two governors argued for a hike, and the market prices a December FOMC hike at about 85% (secondary media report, unconfirmed). That expectation is unchanged.
Scenarios for today's jobs report
The consensus is +59,000 and September was +29,000. Initial jobless claims of 189,000 are the lowest in 57 years, so layoffs are few. The unemployment rate is 4.2%.
| Outcome | Yields | Stocks | Interpretation |
|---|---|---|---|
| Near consensus (+50-60K) | Flat | Tech attempts a rebound | December hike expectations remain, plunge calms |
| Much stronger (+100K or more) | 10-year rises, hike probability rises | More pressure on growth stocks | Path by which yields suppressed by risk aversion rise again |
| Much weaker (negative) | Plunge | Rebound at first, then growth slowdown worries | Combines with the logic of cracks in an AI-investment-dependent growth |
The most dangerous side is strong jobs. Stocks have already fallen on AI worries, and if yields also rise, high-valuation names see both their discount rate and earnings outlook worsen. As in the report's risk factors, if the 10-year rises into the 5% range it becomes grounds for a further correction. Weak jobs lower the hike probability, but if the logic that Q3 GDP of 3.4% leaned on AI investment is right, it spreads into growth worries. Either way, the exact direction is better confirmed by the move in yields in the first 30 minutes after the release.
The structure of inflation rising everywhere at once
Eurozone CPI at 4.0% and the Bank of England's first hike in more than three years signal that tightening is not just a Fed issue. It does not become a factor for a weaker dollar and instead supports the floor for long-term yields. The case for expecting cuts only in the U.S. weakens.
What investors should do
- Do not change positions much before today's release. Direction splits by outcome, so the expected value of a pre-release bet is low.
- Long-term bond ETFs (TLT 81.93) rise during risk aversion but are capped on the upside if hike expectations stay alive. Short-term cash-like assets are relatively safe.
- With many variables between the Nov. 10 tariff truce expiry and the December FOMC, avoid a large one-way bet.