Stocks closed positive for the week amid a sharp rebound Friday after non-farm payrolls increased the most since January. The news briefly sent Treasury yields to their highest in 16 years. The S&P 500 gained 0.52%, breaking a four-week losing streak. The Nasdaq Composite also posted a positive week, climbing 1.62%, while the Dow Jones Industrial Average ended slightly lower, down 0.24% for the week.

U.S. nonfarm payrolls increased by 336,000 last month, topping forecasts for 170,000 and up from an upwardly revised 227,000 August increase. September payroll gains were well above the 267,000 average monthly increase over the prior 12 months, indicating a stronger than desired labor market from the Fed’s perspective. Over the past 12 months, average hourly earnings have increased by 4.2%. The unemployment rate is unchanged at 3.8%.

Bond prices fell sharply last week as the yield on 10-year Treasury notes advanced, ending Friday at 4.791%, up 0.22% for the week. Following the strong payrolls report, the benchmark yield briefly crossed 4.88%, a fresh 16-year high. Yields continue to advance on the Fed’s higher-for-longer interest rate outlook.

Outside of the robust labor market update, other economic data last week sent mixed messages on the domestic growth outlook. The S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI™) posted 49.8 in September, up from 47.9 in August and higher than the earlier released 'flash' estimate of 48.9 (any reading above 50 indicates expansion and below indicates contraction). Apart from the slight expansion seen in April, U.S. manufacturing activity has contracted in ten of the last 11 months, but the recent PMI trend points towards stabilizing activity with the index now just shy of expansion territory.

On the other hand, the U.S. service sector is showing signs of cooling from its recent strength. The S&P Global US Services PMI posted 50.1 in September, down from 50.5 in August and broadly in line with the earlier released 'flash' estimate of 50.2. The latest data signaled a broad stagnation in service sector business activity following seven successive months of growth in output. Despite some reports of sustained inflows of new business, companies highlighted that elevated inflation, high interest rates, and economic uncertainty all stymied customer demand, particularly in travel, tourism and recreation.

Over the weekend, the latest geopolitical “black swan” event came from the Middle East after the weekend's rocket attacks and Hamas-led incursions into Israel. The war began after Hamas militants stormed into Israel on Saturday, bringing gunbattles to its streets for the first time in decades. The conflict is only expected to escalate. Israel expanded the mobilization of reservists to 360,000 on Tuesday, according to the country’s media. This morning the Associated Press reported that after days of fighting, Israel’s military said Tuesday morning that it had regained effective control over areas Hamas attacked in its south, and of the Gaza border. Global crude oil prices initially spiked roughly 4% as the conflict may exacerbate supply issues. U.S. Treasury yields have pulled back slightly from their recent ascent as the geopolitical uncertainty drives an increase in demand for safe haven assets and reduces the likelihood of another rate hike at the upcoming November Fed meeting.