Markets deleted a future rate cut but penciled in a far healthier U.S. labor market, and investors appeared pleased. Major indexes rallied Friday off massive September job gains even as Treasuries trading forecast a less generous Federal Reserve. 
This morning's September nonfarm payrolls report showed 254,000 jobs added, the most in six months and a wake-up call for anyone worried about possible labor lethargy. Analysts had expected just 140,000, according to Trading Economics. Unemployment fell to 4.1% from 4.2%, and the government also upwardly revised July and August jobs growth by a combined 72,000 positions.
With that eye-popping report in hand, market participants rapidly rolled back chances of a 50-basis point November Fed rate cut and now build in nearly 100% odds that the Fed will cut by just 25 basis points, according to CME futures trading. 
Wall Street now projects a total of 50 basis points in further rate cuts before year-end, down from 75 heading into the jobs report. Despite the lower odds, major indexes found buyers Friday, with financials among the leading sectors as Treasury yields popped. Consumer discretionary climbed on perceived stronger demand from all the newly employed.
"For now, inflation data has been trending towards the Fed’s target, the economy is on firm footing, and, based on today’s gains, market participants appear to be ok with a slower pace of Fed easing," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. 
"Although geopolitical risk remains elevated, and the Fed may not be as accommodative as previously expected, stronger-than-expected U.S. economic data appears to be the primary driver of the near-term direction for stocks, and that direction is higher," Peterson added.
In other words, good news is good news, for now. That doesn't mean Wall Street is out of the woods, considering WTI Crude Oil (/CL) just had its best week in months as the world warily awaits a possible reprisal by Israel against Iran. Energy led all S&P sectors in gains this week, by a mile.
And while stocks rallied today on the jobs report, so did Treasury yields and the dollar. These trends could represent headwinds if they persist. Here's where the major benchmarks ended:
•    The S&P 500® index (SPX) climbed 51.13 points (0.9%) to 5,751.07 up 0.22% for the week; the Dow Jones Industrial Average® ($DJI) added 341.16 points (0.81%) to 42,352.75, up 0.09% for the week; and the Nasdaq Composite® ($COMP) rose 219.37 points (1.22%) to 18,137.85, up 0.1% for the week. 
•    The 10-year Treasury note yield (TNX) soared 13 basis points to 3.98%, finishing the week up 23 basis points. The 2-year yield rose 37 basis points this week.
•    The Cboe Volatility Index® (VIX) fell to 18.58 but remains elevated from last month's lows, likely on geopolitical concerns.
Stocks on the move
The following companies had stock price moves driven by analyst ratings, quarterly earnings, or other news:

Rivian (RIVN) fell 3.15% after the company said it's experiencing a supply shortage (without specifying the affected component) and said that production is being disrupted, MarketWatch reported. This led to a cut in its full-year guidance.

Spirit Airlines (SAVE) plunged 24.5% following a report in the Wall Street Journal suggesting that the air carrier was in talks about potentially filing for bankruptcy. Shares have struggled this year after a failed merger with JetBlue (JBLU).

JetBlue Airways ascended 14.2% following the report of Spirit Airlines bankruptcy talks.

The PHLX Semiconductor Index (SOX) climbed 1.6%, led by strength in Nvidia (NVDA) and Broadcom (AVGO). Chip stocks gained after the jobs report, which reinforced ideas of U.S. economic strength.

Jobs report redux and more
Today's payrolls report showed relatively even growth across many sectors of the economy, meaning no single sector appeared responsible for the surprise gains.

The leading sector was food services and drinking places, a sign that the services economy remains healthy despite softness in goods and manufacturing. Health care, government, social assistance, and construction rounded out the top sectors for jobs growth in September.

However, the manufacturing side of the economy showed no jobs growth in September, and neither did mining, oil and gas extraction, or transportation and warehousing.

Hourly wages rose 4% over the last year, and the average workweek edged down by 0.1 hours.

The jobs report may have undercut 50-basis point hopes, but it also helped narrow the yield curve, or the premium of longer-term to shorter-term Treasury yields. While the 10-year Treasury note yield soared today following the report, the 2-year note yield climbed even more as investors reduced their 50-basis point cut expectations. Shorter-term yields are more sensitive to near-term rate policy.

This narrowing of the curve, which had been inverted for more than two years with 2-year yields above 10-year yields, may be a good sign for markets, as re-steepening after the inversion had been bearish for equities in the past.

Next Wednesday features minutes from the last Federal Open Market Committee (FOMC) meeting, perhaps shedding more light on the committee's decision to embark on a 50-basis point "jumbo" rate cut.

The Fed cut rates in reaction to what at the time appeared to be soft jobs growth. Today's report, along with strong August job openings data earlier this week, challenges the weak labor thesis, and it's not just one data point because the government also raised estimates in its previous two reports. Layoffs also eased in September.

Next week, inflation grabs the baton from labor data with Thursday's September Consumer Price Index (CPI) and Friday's September Producer Price Index (PPI) reports.

Early expectations are for CPI growth of 2.3% year over year, down from 2.5% in August, according to Trading Economics. Core CPI, which strips out volatile food and energy prices, is seen up 3.1%, down from the prior 3.2%. If CPI comes in as expected, it might reinforce ideas that the Fed could feel comfortable staying on its rate cut course despite recent data indicating robust economic growth.

The coming week brings 19 Fed member speeches and other communications, keeping investors on their toes. Every day features remarks by a Fed governor or vice chair, meaning market participants are likely to quickly hear what Fed policy makers think of today's jobs report and its ramifications.

Late today, futures traders build in a 99% chance rates will fall 25 basis points at the Federal Open Market Committee (FOMC) meeting on November 6–7, based on the CME FedWatch Tool. There's a 1% chance of no change from current rates.

Turning back to this week's stock market performance, index breadth still looks constructive and can be a sign of healthy markets where a rising tide lifts most boats. As of midday Friday, 75% of SPX stocks traded above their respective 50-day moving averages, with 47% of $COMP stocks and 52% of Russell 2000® (RUT) stocks also above their 50-days.

Advancing shares outnumbered declining ones by three-to-one this week through midday Friday, and seven of 11 S&P sectors trade with 80% or more of their components above their 50-day moving averages.

This wide breadth indicates the "cyclical trade" into sectors beyond mega caps remains intact and markets aren’t moving toward defensive trades at the equity level. Though major indexes only made marginal gains for the week, they got a bit of a tailwind today not just from the jobs report, but from news that a major strike at U.S. ports had ended.

On a technical basis, the SPX held its ground this week above the prior all-time closing high from July despite geopolitical uncertainty and declining chances of a steep November rate cut. "There’s not much more to interpret from the price action at this juncture other than to say that the uptrend remains intact, and the bulls still appear to be in control," Schwab's Peterson said.

On a less bullish note, the SPX now trades at a nearly 22 price-to-earnings (P/E) ratio, historically high. This might sap investor enthusiasm for now, though solid earnings growth could help ease valuations.

Unfortunately for anyone banking on improved earnings growth, analysts keep backing up the truck. The average third quarter S&P 500 earnings per share estimate slipped to 4.2% today from 4.6% a week ago, according to research firm FactSet. That's down from 7.8% at the end of June.