Wall Street rallies on robust jobs data and US‑China trade thaw

How Wall Street's rally extends as strong jobs data fuels market optimism

US stock markets locked in a second week of gains as robust economic data and potential easing of US-China trade tensions boosted investor confidence, with all eyes now on the upcoming Fed decision.

US markets extend winning streak

US stock markets rallied on Friday, locking in a second consecutive week of gains, fuelled by strong economic data and the potential easing of trade tensions between the US and China.

For the week, the US Tech 100 surged by 3.45%, while the Wall Street gained 1,207 points or 3%. The US 500 increased by 2.11% for the week, achieving its longest winning streak—nine consecutive days—since 2004.

Jobs report exceeds expectations

Friday's Non-Farm Payrolls report was robust as headline nonfarm payrolls increased by 177,000 in April, compared to the 135,000 expected. The unemployment rate held steady at 4.2% and would have dropped to 4.0% if not for the rise in the participation rate to 62.6% from 62.5%.

The resilient labour market data alleviates worries about an economic slowdown for now and bolsters confidence in the Federal Reserve's ability to remain patient with policy adjustments. It remains to be seen if there will be meaningful deterioration in the hard data, or if the recent de-escalation and the potential of "framework deals" prevent the hard data from following the soft data lower.

Key events in focus this week

Attention this week will focus on potential tariff negotiations between the US and China, and the Federal Reserve's interest rate decision, previewed below. Investors will also closely watch Q1 earnings reports from companies including Ford, AMD, Walt Disney and Uber. Finally, the ISM Services PMI is expected to fall to 50.2 from 50.8 to narrowly remain in expansion territory.

FOMC interest rate decision

Thursday, 8 May at 4.00am AEST

At the last FOMC meeting in mid-March, the Fed kept the Fed Funds rate on hold at 4.25%–4.50%, citing solid economic growth, low unemployment, and slightly elevated inflation.

The Fed's projections (Dots) showed that members still expected to deliver two 25 basis point (bp) rate cuts in 2025. The Fed's updated forecasts, as expected, showed an increase in inflation and unemployment forecasts while lowering its GDP forecasts, reflecting the overall impact of increased tariffs.

The significant reciprocal tariffs announced on "Liberation Day" have raised fears of higher inflation and a slowdown in the labour market, testing both elements of the Fed's dual mandate.

As such, the Fed is expected to keep the Fed's Funds rate unchanged this week at 4.25%-4.50%. It is expected to emphasise ongoing economic uncertainty, particularly due to potential tariff effects and the need to remain patient as it waits for more data. No Summary of Economic Projections or "dot plot" update is due for this meeting.

Following Friday's firm Non-Farm Payrolls report, the likelihood of a Fed rate cut in June eased to about 35% from around 55%. The July meeting is fully priced for a 25bp rate cut with a cumulative 78 basis points of Fed rate cuts priced by year-end.

Fed funds rate chart

US Tech 100 technical analysis

The rally from the 16,542 low of April 7 to Friday night's 20,176 high has at this stage unfolded in three waves (ABC). This follows a three-wave decline from the 22,222 record high to the 16,542 low, which leaves the picture somewhat messy when viewed through an Elliott Wave (EW) lens.

With the jury out from an EW perspective, we will continue to lean against the 200-day moving average at 21,777, which the US Tech 100 tested on Friday night. Specifically, while the US Tech 100 remains below the 200-day moving average, currently at 21,177, medium-term downside risks remain, including a retest of the April 16,542 low. If the US Tech 100 sees a sustained break above the 200-day MA, it would indicate that the decline from the 22,222 record high to the 16,542 low is complete and that the uptrend has resumed.

US Tech 100 daily chart

US 500 technical analysis

The rally from the 4835 low of April 7 to Friday night's 5700 high has at this stage unfolded in three waves (ABC). This follows a three-wave decline from the 6147 record high to the 4835 low, which leaves the picture somewhat messy when viewed through an Elliott Wave lens.

With the jury out from an EW perspective, we will continue to lean against the 200-day moving average at 5746, which the US 500 fell narrowly short of on Friday night.

Specifically, while the US 500 remains below the 200-day moving average, currently at 5746, medium-term downside risks remain, including a retest of the April 4835 low. If the US 500 sees a sustained break above the 200-day MA, it would indicate that the decline from the 6147 record high to the 4835 low is complete and that the uptrend has resumed.

US 500 daily chart

• _{Source: TradingView. The figures stated are as of 05 May 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}