US Treasury yields fell as traders increased bets on a Federal Reserve interest-rate cut next month following a mixed jobs report. The unemployment rate rose to 4.4%, the highest in nearly four years, even as job growth increased. The yield on two-year notes dropped to a two-week low of 3.55%. However, some Fed officials have expressed caution about further easing, citing elevated inflation.

At SIFMA's Market Structure Conference, panelists from Jane Street, DASH, and MIAX discussed how technological advancements -- including AI and machine learning -- are reshaping options trading, from order routing and analytics to liquidity provision. While trading firms are increasingly applying data science tools to navigate growing market complexity, exchanges noted limitations on integrating AI into core matching functions to maintain fairness and determinism. Speakers also highlighted tensions between innovation and standardization as new products and expirations proliferate, emphasizing the need for clear communication, regulatory alignment, and market resilience as options markets evolve.

The US stock market experienced its most significant intraday reversal since April Thursday, with the Nasdaq-100 Index falling 2.4% and the S&P 500 Index dropping 1.6%, wiping out more than $2.7 trillion in market value. Theories for the sell-off include concerns about the profitability of AI projects, a strong jobs report suggesting the Federal Reserve might not cut interest rates, and a significant drop i n bitcoin.

Vanguard's fixed-income chief, Sara Devereux, says the Federal Reserve will likely cut interest rates only once or twice following two quarter-point reductions this fall, contrary to Wall Street's expectations of three to four cuts by 2026. Devereux says robust growth fueled by artificial intelligence spending will limit the Fed's ability to ease policy without stoking inflation, and she also warns that corporate debt prices may face pressure from a surge in bond issuance.

Federal Reserve Governor Lisa Cook warned that the increasing use of leveraged basis trades by hedge funds in the $30 trillion Treasury market could heighten vulnerability during periods of stress. The strategy, which seeks to profit from small price gaps between cash Treasuries and futures, has grown rapidly and may amplify instability or disrupt market functioning in extreme conditions, she said. "Outside of episodes of stress, relative value trades substantially improve the efficiency and liquidity of Treasury securities and related markets," said Cook. "Yet, during episodes of stress, the unwinding of crowded positions in such trades could magnify instability in these markets."

Federal Reserve Governor Stephen Miran is urging the central bank to overhaul existing Wall Street regulations before addressing broader economic and balance sheet issues. Miran says that years of restrictive oversight have impacted the banking sector, calling for a review of how regulations interact with financial markets and policy implementation. Miran suggests regulatory incentives cause banks to hold excessive reserves, necessitating a larger Fed balance sheet, and advocates for banks to hold more Treasurys instead of reserves to improve earnings and reduce the perception of Fed subsidies.

The US economy added 119,000 jobs in September, surpassing expectations, according to a delayed Bureau of Labor Statistics report. However, the unemployment rate rose to 4.4%. The mixed results could perpetuate the uncertainty surrounding the Federal Reserve's upcoming December policy meeting. "This isn't going to change anybody's mind," said David Seif of Nomura.