Hello, friends! Today we are discussing events that rocked traditional financial markets but are also echoing in our crypto world. Last week, the main stars of Wall Street – Dow Jones, S&P 500, and Nasdaq – put on a real show, demonstrating confident growth. The S&P 500 even distinguished itself by delivering the longest winning streak since 2004 and fully recouping losses that occurred after Trump's April 'tariff games.'
So what became the fuel for this rally? Two main reasons, both closely related to macroeconomics and geopolitics.
Engine of rally #1: Employment report – better than feared
The hottest news was the April report on the number of non-farm payroll jobs. The U.S. economy added 177,000 jobs, which was significantly above consensus forecasts (around 130,000-133,000). This figure, although lower than the downwardly revised March figure (185,000 instead of 228,000), was received with relief by the market. It shows that the American labor market remains resilient, and the risk of an immediate sharp recession is decreasing.
But there are a couple of important 'buts':
Revisions: The total number of jobs for February and March was revised down by 58,000. This shows that the economy added fewer jobs in those months than initially thought. In other words, the labor market in the recent past was slightly weaker.
Wages: Average hourly earnings grew less than expected (by 0.2% for the month and 3.8% for the year – the lowest since July 2024). For the Fed, this may be good news (less inflationary pressure), but not so much for assessing consumer activity.
Looking broader: The unemployment rate remained stable (4.2%), and a broader measure of unemployment (U6) even decreased slightly (to 7.8%). The labor force participation rate rose slightly (to 62.6%). These are signs of a stable labor market, if not a rapidly growing one.
Experts like Sima Shah from Principal Asset Management believe that this report gives the economy a breather and 'delays recession fears,' but note that the economy will likely weaken in the coming months. Daniel Zhao from Glassdoor adds that the true impact of tariffs on the labor market will be seen later, possibly only in the May report.
Engine of rally #2: Tariff battle – ceasefire or calm before the storm?
The second factor fueling optimism is news about the possible resumption of trade talks between the U.S. and China. Beijing stated that it is 'assessing' Washington's proposals for dialogue. Following the introduction of new high tariffs by the U.S. (up to 145% on Chinese goods), this hint of readiness for negotiations was received as a positive signal.
Some analysts believe we may have passed the 'peak of tariff hysteria.' However, China clearly states: readiness for talks exists, but only if the U.S. revises its unilateral tariffs. And both sides, it seems, do not want to appear as the first to concede. This situation remains fragile and could change at any moment.
Market reaction and views on the Fed
The result of the combination of these factors? Broad growth in the stock market. Not only the giants grew (although the tech sector and industrial companies were leaders), but also the stocks of smaller companies (the Russell 2000 index showed a stronger percentage increase than the major indices). Almost 90% of stocks in the S&P 500 rose.
An interesting reaction followed in the market's expectations regarding the Fed's rate. Despite the nuances of the employment report (weak wages, revisions), the strong headline (177k) prompted traders to slightly shift their expectations for the first rate cut. Now most are betting on July, rather than an earlier date, although the market still expects 2-3 cuts by the end of the year. The Fed is expected to maintain the rate unchanged at its next meeting, while public pressure from President Trump to lower the rate ('NO INFLATION, THE FED SHOULD LOWER ITS RATE!!!') remains.
Of course, not everything was perfect. Some companies directly affected by tariffs showed weak dynamics after earnings reports – for example, Apple and Amazon. Sectors like the federal government (down 9k jobs, partly due to state reduction efforts) and manufacturing (-1k) also showed a decline in employment.
What does this mean for crypto?
Although we are talking about traditional markets, this analysis directly concerns us as well:
Overall sentiment: Improved sentiment on Wall Street, reduced fears of recession, and hopes for a trade peace create a more favorable backdrop for all risk assets. When 'big money' feels more confident in stocks, they may be more inclined to invest in cryptocurrencies as well.
The Fed and liquidity: Expectations regarding the Fed's actions are critically important for assessing future liquidity in the system. Although the first rate cut has been delayed, the mere fact that the market anticipates policy easing within the year is positive for risk assets.
Attention to detail: As shown by the NFP report, it's important to look not only at the headlines but also at the nuances (wages, revisions). The economy is complex, and contradictory signals require thoughtful analysis.
As a result, the rally on Wall Street is a powerful signal of positivity, based on strong employment data (despite caveats) and hopes for a trade peace. This is a good sign for the overall market climate, which could also support the crypto market. However, we should not forget the persistent risks (tariffs, geopolitics) and closely monitor the actions of the Fed.
Stay informed, analyze, and good trades!
P.S. As always, remember: this is not investment advice. Markets are unpredictable, and decisions should be made independently.