Editor
Wall Street was buzzing with some good news after President Donald Trump chatted with Chinese leader Xi Jinping. That conversation seemed to lift spirits and ease some worries about the often tense relationship between the US and China. On Thursday, stocks showed a nice uptick, with the Dow Jones Industrial Average climbing by 0.3%, the S&P 500 going up by 0.4%, and the Nasdaq Composite rising 0.7%, thanks in large part to a bounce-back in tech shares.
The call lasted 90 minutes and, interestingly, was initiated by Trump. Both leaders described the conversation as constructive. Trump took to social media to announce that the call ended on a “very positive conclusion for both Countries,” and suggested that in-person meetings could happen soon.
While there were few specifics shared about what was actually discussed, just the fact that the two leaders communicated seemed to matter more to investors than the content of their conversation. It’s often the case in the market that what people feel can have a bigger impact than what’s really happening. As Dana Klein, a strategist at Arbor Capital, put it, “Investors aren’t reacting to a breakthrough. They’re reacting to the mere possibility that tensions could de-escalate.” This sentiment fueled the rally, especially considering how shaky things have been lately.
Experienced traders are quite familiar with this kind of market behavior. There’s even a nickname for it—the “TACO” trade, which stands for “Trump Always Chickens Out.” Wall Street has become accustomed to Trump calming trade tensions right when the market starts to feel uneasy.
However, not everything is looking rosy. Recent labor statistics show that the job market might be feeling some pressure from ongoing trade worries. The Department of Labor reported that jobless claims are at an eight-month high, with continuing claims at their highest level in four years. While this isn’t yet a cause for alarm, it does indicate a cooling trend that might complicate decisions on interest rates from the Federal Reserve.
Mark Reynolds, the chief economist at Calyx Analytics, pointed out, “Slower hiring could be the canary in the coal mine.” If businesses are starting to hold off on hiring or delaying projects due to trade uncertainty, the effects could trickle down through the economy faster than many think.
Investors are really looking forward to the upcoming jobs report for May, which could influence everything from Federal Reserve policies to messaging leading up to the November elections.
On a different note, corporate earnings are also on the radar. Major players like athletic wear company Lululemon and semiconductor giant Broadcom are set to announce their quarterly results soon. Analysts have high hopes for strong performance from both companies, but they’ll be keeping a close eye on any signs of slowing demand or supply chain issues.
As earnings season comes to a close, traders are increasingly seeking insight from broader economic signals and political developments.
While the call between Trump and Xi provided a temporary boost, many analysts doubt that it will lead to substantial change. Klein summed it up well: “Markets love a good headline, but diplomacy by tweet is no substitute for a deal.” Until tangible results like tariff reductions and clear agreements come into play, the market will remain on a precarious tightrope.
For now, optimism is keeping things afloat, but as more economic data comes in, investors may soon be looking for something more solid than just hopeful gestures to maintain this upward trend.
