Good morning! After a stronger-than-expected September jobs report Friday, each of the benchmark stock indexes eked out weekly gains:

• S&P 500: +0.2%

• Nasdaq Composite: +0.1%

• Dow Jones Industrial Average: +0.1%

Today’s edition unpacks whether the Federal Reserve panicked in making a half-point rate cut in September.

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Did the Fed really have to go jumbo?

The US economy continues to hum at a stronger clip than many people expect, which raises the question as to whether the Fed made the right call going with a jumbo rate cut.

Employers added 254,000 jobs in September, according to the Labor Department’s initial count — the most since the start of the year.

It also revised July and August numbers higher by a total of 72,000 jobs.

Plus, unemployment dipped slightly to 4.1%.

To be sure, a large share of new jobs are government jobs, and recent history suggests a downward revision will come at some point soon.

That said, the economy looks to be in good shape and a range of recent data suggests the Fed could have opted for a smaller, 25-basis-point move in September.

Gene Goldman, chief investment officer for Cetera Investment Management, has been saying for some time that the Fed did not need to be so bold with its first cut.

“The move by the Fed to aggressively cut rates has added a new risk that I believe becomes the biggest — or papa bear risk — to this goldilocks economy,” Goldman told me. “[That] the Fed cut rates too much, too fast.”

To that point, following Friday’s data, Bank of America analysts changed their call for the November Fed meeting.

They now expect policymakers to cut rates by 25 basis points, rather than 50.

“The data flow since the Fed's decision to cut by 50bp in September has been remarkably positive, raising the question of whether the super-sized cut was warranted,” BofA’s Aditya Bhave wrote in a note to clients.

And gangbusters jobs report aside, it was only a week ago that GDP and GDI were revised substantially higher.

The Morgan Stanley team, meanwhile called the jobs report “resoundingly strong” and Goldman Sachs said the data have “reset the labor market narrative” and quelled fears.

Elyse Ausenbaugh, JPMorgan Wealth Management’s head of investment strategy, said the US now looks even closer to a soft landing.

Markets seem to agree.

As of Sunday evening, CME data showed about 97% odds for a 25-basis-point rate cut in November.

One week prior, that stood at about 50%.

“The bottom line here is that a resilient labor market is continuing to support consumers and the Fed is cutting rates,” said JPMorgan’s Ausenbaugh.

“Historically, that has been an environment conducive to the outperformance of stocks and bonds over cash.”

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Elsewhere:

📊 Earnings and inflation are due this week. PepsiCo releases its quarterly update Tuesday, followed by Dominos and Delta Air Lines Thursday. That same morning, the September inflation report is also due. JPMorgan, Wells Fargo, BlackRock, and Bank of New York Mellon will close out the week on Friday.

🚗 What is Tesla actually worth? Elon Musk’s company makes electric vehicles, invests in AI, builds energy-storage technology, and produces humanoid robots. The potential is huge, which is what makes it so hard for Wall Street’s best analysts to accurately value the stock. Currently, the automaker commands a premium at 90 times earnings estimate for the next 12 months. (Barron’s)

📈 The government’s climbing debt is not nothing. No matter who wins the November election, the US will keep over-spending and potentially keep Treasury yields higher than markets expect. Some economists say consumer prices could spike “if we see a significant growth boost from a major fiscal expansion.” (WSJ)

Rapid-fire:

• Today marks a year since the deadly October 7 attacks by Hamas on Israel (Bloomberg)

• Seven states are back above pre-pandemic home inventory levels (ResiClub)

• Harvard’s massive endowment has generated two decades of poor returns and losing strategies (Bloomberg)

• Traders have turned bullish on Chinese stocks, but that doesn’t mean US companies are optimistic on the outlook for China’s economy (Sherwood News)

• JPMorgan, HSBC, Invesco, and other firms are still skeptical on Chinese stocks despite their recent rally (Bloomberg)

• Google’s search dominance is slipping in market share to AI search-engines and TikTok (WSJ)

• Here are the biggest takeaways from my Fulbright media fellowship in Berlin, Germany (Link)

Last thing:

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