#TradeWarEases #TrumpTariffs #Fed
Wall Street, it seems, is once again performing its favorite dance – two steps forward, one step back, all accompanied by quite contradictory economic data. While investors are trying to decipher which way the pendulum of the American economy will swing, one star continues to shine particularly bright. Yes, you guessed it, we're talking about Nvidia again, whose shares hit an 18-week high, soaring to $143.55.
This tech giant seems to live in its own universe, where the laws of economic gravity act selectively. Having added more than 26% in the last four weeks and over 17% for the year, Nvidia remains a symbol of faith for many investors in the bright future of artificial intelligence and high technology. Its success, along with the rise of other mega-caps like Microsoft, Apple, and Amazon, has pushed the Nasdaq to new heights, even when the rest of the market showed signs of contemplation.
Economic cocktail: shake, but do not mix?
There is certainly much to ponder. Thursday brought a whole heap of macroeconomic statistics, and this 'Molotov cocktail' for analysts turned out to be quite potent. On one hand, there seemed to be a glimmer of hope in U.S.-China relations: Presidents Trump and Xi had a phone conversation and agreed to resume trade talks. Markets traditionally love such news, as trade wars are at least a headache.
On the other hand, economic indicators paint a picture far from idyllic. Initial jobless claims unexpectedly jumped to 247,000 – the highest since October last year. It's like the first yellow leaf on a tree in autumn: not winter yet, but already a hint. Add to this a 6.6% increase in labor costs in the first quarter (above forecasts!) alongside a 1.5% decline in labor productivity. This combination is a direct path to increasing inflationary pressure and, to be honest, to old-fashioned stagflation fears. Productivity in the manufacturing sector, however, showed growth, which somewhat softens the picture, but the overall trend is alarming.
An interesting touch comes from the job cuts statistics from Challenger, Gray & Christmas. Although in May the number of layoffs was the lowest in four months, it has increased by a significant 80% compared to the same period last year since the beginning of the year. Interestingly, the main reason for layoffs in 2025 is cited as 'DOGE Impact' – no, this is not about the meme cryptocurrency, but about the Department of Government Efficiency, whose activities lead to cuts in the public sector and related structures. Efficiency is good, but the labor market clearly feels it.
Is the Fed on the low start? The dollar and yields say 'Yes'
Against the backdrop of this data, it is not surprising that the yield on 10-year U.S. Treasury bonds has fallen to monthly lows (around 4.36%), while the dollar has dropped to a six-week low. The market is clearly pricing in that the Federal Reserve, seeing signs of an economic slowdown and potential risks, will be forced to move towards easing monetary policy. Traders are already betting on at least two rate cuts this year, with the first possibly occurring as early as September. President Trump himself continues to urge the Fed to lower rates, although Fed officials are still exercising caution, especially in light of trade uncertainty.
Trade surprise and other heroes of the day
A pleasant surprise came from the U.S. trade balance data. The deficit in April sharply decreased to $61.6 billion – the lowest level since September 2023. Exports reached record levels, while imports plummeted by 16.3%. The latter is likely related to the March rush when importers hurried to bring in goods ahead of new tariffs. The decline in imports of pharmaceuticals, cars, and electronics made the main contribution. This is certainly a positive signal, although the sharp drop in imports may also indicate a decrease in domestic demand.
One cannot overlook the successes of individual companies outside the tech Olympus. For example, shares of Gilead Sciences reached an 8-week high, showing an impressive growth of over 74% over the past 12 months. Pharmaceuticals and biotechnology continue to attract investors.
What's next? Waiting for Friday's 'payrolls'
So, what do we have in the dry residue? The market continues to be in a state of fragile equilibrium. The positivity from tech giants and hopes for resolving trade disputes are battling against concerns about inflation, the state of the labor market, and the overall trajectory of economic growth. In this situation, the Friday report on non-farm payrolls becomes crucial. This data can either confirm the market's fears or, conversely, give investors a glimmer of optimism.
One thing can be said for sure: it won't be boring. So, dear readers, fasten your seatbelts. It seems the roller coaster on Wall Street is just gaining height, while the Fed keeps everyone on edge, like a director of a good thriller before the climax. We will keep an eye on the developments!
