The S&P 500 closed at its highest level since February on Friday. Cooling trade tensions and better-than-expected jobs data drove this. Wall Street rallied this week.
Investors hoped that President Donald Trump might adopt a softer approach in his trade war with China. This optimism grew when Trump announced that the next round of US-China trade talks is set for Monday. The market responded positively to Trump’s announcement.
The Dow closed higher by 443 points, or 1.05%. The broader S&P 500 rose 1.03%. The tech-heavy Nasdaq Composite gained 1.2%.
All three major indexes posted back-to-back weeks of gains. “The meeting should go very well,” Trump said. This announcement comes amid a contentious tariff war between the world’s two largest economies.
Trump seeks to rebalance perceived unfair trade practices. Trump and Chinese President Xi Jinping spoke for 90 minutes on Thursday. Trump expressed optimism about resolving ongoing trade tensions.
While there is still uncertainty over tariffs, the stock market is forward-looking. It has been pricing in an eventual thawing of trade fears,” said Glen Smith, Chief Investment Officer at GDS Wealth Management. Stock futures surged on Friday after the release of a better-than-expected jobs report.
This eased concerns about the US economy’s resilience amidst Trump’s tariff policy. Data from the Labor Department showed a slight slowdown in job growth. But the numbers were still better than anticipated.
“While job growth decelerated in May, the payroll data came in above expectations. It is extremely encouraging to see such a positive report during a time of significant uncertainty driven by tariffs and economic fears,” Smith added. Despite the market rally, uncertainty lingers about the longer-term effects of Trump’s tariff policies on economic growth and business activity.
It may take several months for the full impact of tariffs on business decisions, hiring, and inflation to become apparent.
sp 500 rally continues amid trade hopes
“The harmful impacts of uncertain tariff policies have yet to be fully reflected in the jobs data,” said Steve Wyett, chief investment strategist at BOK Financial.
Among the stocks leading the rebound was Tesla. It rose 3.67% after a significant drop the previous day. Tesla had plummeted 14% on Thursday following a social media spat between Trump and CEO Elon Musk.
Musk recently stepped down from overseeing the Department of Government Efficiency. Despite Friday’s recovery, Tesla’s market value remains down about $119 billion over the past two days. Trump commented, saying, “He’s got a problem.
The poor guy’s got a problem.”
Bond yields rose on Friday as traders reduced their expectations for rate cuts from the Federal Reserve this year. A resilient labor market gives the Fed more time to maintain current interest rates. The odds of a rate cut in July fell to 16% from 30% just a day ago.
Traders now eye September as the potential timing for the next rate cut. We remain comfortable with our view that the Fed won’t cut rates this year,” analysts at Bank of America stated in a note. The yield on the 10-year US Treasury rose to 4.51%.
The yield on the 30-year US Treasury increased to 4.97%. “The Fed should be reluctant to cut rates. The full effects of tariffs haven’t impacted inflation numbers yet.
The job market isn’t deteriorating enough to force their hand,” added Chris Zaccarelli, Chief Investment Officer at Northlight Asset Management. Investors will closely watch the upcoming US-China trade talks on Monday. This follows weeks of simmering tensions between Washington and Beijing, culminating in recent tariff hikes ordered by Trump.
Despite the heightened tariffs, Wall Street rallied, anticipating that Trump will eventually temper his aggressive tariff stance. “There are no signs of a summer break from tariff drama,” analysts at JPMorgan Chase noted in a Tuesday report. US stocks have steadily climbed out of the hole caused by Trump’s tariff uncertainties.
The S&P 500 is up about 1.5% so far this month. Analysts at Citi remarked, “Tariff negotiations are likely to remain front and center. We’ll need to keep an eye out for further policy curveballs.”
