The September jobs report was weaker than expected, and the market welcomed it. On Friday, October 2, 2026, the Bureau of Labor Statistics said employers added just 29,000 jobs in September. Economists had expected roughly 84,000 to 90,000. The unemployment rate rose to 4.2% from 4.1%. Revisions also took a combined 60,000 jobs out of July and August, and July is now a loss of 10,000 jobs.
Wage growth slowed as well. Average hourly earnings rose only 0.1% for the month and 3.0% from a year earlier. CNBC noted that was the slowest annual pace since May 2021. Health care, construction and manufacturing added jobs. Government, temporary help and information services cut them.
Investors read the soft numbers as a reason for the Federal Reserve to pause. The Fed raised rates to 3.75%–4.00% on September 16, 2026. After the report, CME FedWatch showed an 82.8% chance the Fed holds steady at its October 27–28, 2026 meeting. Jefferies economist Thomas Simons called the report "the nail in the coffin for an October hike." The 10-year Treasury yield fell to about 5.18%, and the Nasdaq hit a record high during the session.
Lower yields usually help housing and real estate stocks, which depend on borrowing costs. Two of the biggest names in those groups show why one day of relief may not be enough.
D.R. Horton (NYSE: DHI)
D.R. Horton is the nation's largest homebuilder by volume. Its biggest problem right now is mortgage rates. Freddie Mac reported on October 1, 2026, that the average 30-year fixed mortgage rate was 7.28%. That's up from 7.03% a week earlier and 6.34% a year earlier. Rates have risen more than a full percentage point since April 23, 2026, when they stood at 6.23%.
Even with yields falling on Friday, DHI traded at $135.55 at midday, down 1.10%. The stock has a market cap of $37.91 billion and a P/E ratio of 12.94. It sits only 2.88% above its 52-week low of $131.75 and 23.08% below its 52-week high of $176.22.
On October 1, 2026, Morgan Stanley started coverage with an Equal-Weight rating and a $151.00 target. Coverage reports said the firm credited D.R. Horton's scale, financing platform and relationship with Forestar, but flagged affordability pressure on first-time buyers. Other firms have been cutting targets. Evercore ISI lowered its target to $166.00 from $177.00 on September 25, and Truist cut to $140.00 from $150.00 on September 16. All four ratings in the latest consensus are Hold, with an average target of $152.75. That implies about 12.69% upside.
The company is also buying back stock. In a September 15, 2026 filing, D.R. Horton said its board approved an additional $5.00 billion in repurchases, with no expiration date. It expects fiscal 2026 buybacks of at least $3.25 billion. D.R. Horton reports fiscal fourth-quarter results before the market opens on October 29, 2026.
Realty Income (NYSE: O)
Realty Income is a real estate investment trust that leases properties to retailers and other tenants. It pays its dividend monthly, which makes it popular with income investors. It also tends to fall when bond yields rise. On September 24, 2026, Scotiabank downgraded the stock to Sector Perform from Sector Outperform and cut its target to $59.00 from $67.00. The firm cited rate pressure on FFO growth (funds from operations, a key REIT earnings measure), limited benefit from new sources of capital, and higher-than-peer sensitivity to interest rates.
The stock gained 0.94% on Friday to trade at $54.03. It has a market cap of $50.38 billion and a P/E ratio of 39.46. Like D.R. Horton, it trades just above its 52-week low: 1.31% above $53.33, and 20.47% below its 52-week high of $67.94. All four ratings in the consensus are Hold. The average target is $62.50, implying about 15.68% upside, and the high target is $65.00.
The income is substantial. The monthly dividend was recently raised to $0.2715 per share, or about $3.26 a year, which works out to roughly 6% at the current price. Management raised its 2026 AFFO guidance (adjusted funds from operations) to $4.44–$4.45 per share in August. The bigger issue is the cost of growing. CFO Jonathan Pong said new investments must meet or exceed a long-term cost of capital of about 8%. When the share price is low and borrowing costs are high, it's harder for the company to raise money and still find deals that clear that bar.
What to Watch
Friday's report helped, but it doesn't settle the rate outlook. Navy Federal economist Heather Long said she doesn't expect the Fed to skip a December hike. And mortgage rates follow longer-term Treasury yields more closely than they follow the Fed's decisions. Key dates ahead:
Freddie Mac's next weekly mortgage survey on October 8, 2026
The Fed meeting on October 27–28, 2026
D.R. Horton's earnings on October 29, 2026
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