TL;DR:
- S&P 500 hits highest level since February 2025 on back of softer trade rhetoric and resilient labor data.
- President Trump confirms US-China trade talks to begin Monday in London.
- Market sentiment boosted by job gains and Tesla’s partial rebound.
- Fed rate cut expectations diminish as economic signals improve.
- Analysts caution tariff impacts may still surface in future economic data.
Market Optimism Grows as Trade Tensions Cool
Wall Street ended the week on a high note, driven by renewed optimism around trade negotiations and better-than-expected economic data. The S&P 500 rose 1.03% on Friday, closing at its highest point since February 2025, as markets reacted favorably to President Donald Trump’s announcement of upcoming US-China trade talks.
In a statement posted to social media, Trump confirmed that senior officials—including Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and U.S. Trade Representative Jamieson Greer—will meet with Chinese counterparts in London on Monday.
The Dow Jones Industrial Average added 443 points (1.05%), while the Nasdaq Composite gained 1.2%, signaling broad investor confidence across sectors.
Market Rebound Indicators
| Metric | Data |
| S&P 500 Weekly Gain | 0.0103 |
| Dow Jones Weekly Gain | 0.0105 |
| Nasdaq Weekly Gain | 0.012 |
| Jobs Added in May | 139,000 |
| Tesla Rebound (Friday) | 0.0367 |
| Fed Rate Cut Probability (July) | 16% ↓ from 30% |
Trade Diplomacy Revives Market Confidence
Trump’s announcement follows a 90-minute call with Chinese President Xi Jinping, which the White House described as “encouraging.” While tariff uncertainty persists, Wall Street interpreted the move toward dialogue as a sign of softening U.S. strategy.
“The rhetoric on tariffs is much tougher than the action,” said Glen Smith, CIO of GDS Wealth Management. “Markets are looking forward and pricing in eventual progress.”
This comes after a period of heightened tension that saw tariffs on steel and aluminum jump from 25% to 50%. Despite this escalation, investors appeared willing to bet on diplomacy over disruption.
Resilient Job Market Eases Economic Fears
Another key driver behind the rally was the Labor Department’s May jobs report, which showed 139,000 new positions added. While slightly down from the previous month, the figure surpassed analyst expectations and eased concerns about an economic slowdown linked to tariff policy.
“The payroll data came in above expectations,” said Smith. “It’s extremely encouraging to see six-figure growth during a time of uncertainty.”
Earlier in the week, ADP data had raised red flags by showing a decline in private-sector hiring. But Friday’s numbers suggested the labor market remains sturdy, at least in the short term.
Still, experts caution that the true economic impact of tariffs—particularly on hiring and inflation—may not be fully evident for several months.
“The deleterious impacts of uncertain tariff policies have yet to be fully reflected in the jobs data,” said Steve Wyett, chief investment strategist at BOK Financial.
Tesla’s Wild Ride Adds Volatility
Tesla (TSLA) also contributed to the market’s rebound after suffering its largest single-day loss in history on Thursday. The electric vehicle giant had plunged 14%, wiping $152 billion off its market cap, after a public clash between CEO Elon Musk and President Trump.
On Friday, the company’s stock rose 3.67%, trimming losses but still leaving a two-day decline of approximately $119 billion. Tensions between Musk and Trump emerged after Musk’s resignation from the Department of Government Efficiency and a series of barbed public exchanges.
“He’s got a problem,” Trump said in an interview with CNN’s Dana Bash. “The poor guy’s got a problem.”
Market watchers are closely monitoring whether political fallout may have longer-term consequences for Tesla’s stock and regulatory relationships.
Fed Policy: Patience Over Panic
The improving jobs data also shifted expectations around Federal Reserve rate policy. The CME FedWatch tool showed that the odds of a July rate cut dropped from 30% to 16%, as analysts believe the Fed has room to wait.
Bond markets reflected this sentiment. The 10-year Treasury yield climbed to 4.51%, while the 30-year yield rose to 4.97%. Rising yields suggest diminishing demand for rate cuts, as inflation and employment metrics remain relatively strong.
“The Fed should be reluctant to cut rates,” said Chris Zaccarelli, CIO at Northlight Asset Management. “We’re not seeing enough deterioration in the job market.”
The ‘TACO’ Trade and What’s Ahead
Investors have increasingly embraced the so-called “TACO” trade—short for “Trump Always Chickens Out”—believing that the President will ultimately avoid the most aggressive versions of his tariff threats.
Next week’s trade negotiations in London will be closely watched for any breakthroughs or new risks. Even with the recent gains, Wall Street remains on edge amid a highly unpredictable policy environment.
“Both budget and tariff negotiations are likely to remain front and center,” said analysts at Citi. “We’ll need to keep an eye out for further policy curveballs.”The S&P 500 has now posted back-to-back weeks of gains, and is up 1.5% for the month of June, its best monthly performance since November 2023. Whether that momentum continues will depend on the tone and substance of next week’s trade talks.
