Wall Street surges on softer Trump tariffs and dovish Federal Reserve signals

US equities rebound as Trump eases tarriffs

United States (US) stock markets finished higher last week as investor concerns eased regarding President Trump's tariffs and the Federal Reserve's (Fed) independence. A more dovish stance from the Fed also supported the rally. The US Tech 100 surged 6.43% for the week, and the benchmark US 500 rose 4.59%. Despite its gains, the US 500 remains 10% below its February highs.

Starting with tariff news, President Trump showed further signs of softening his position, indicating a potential reduction in tariffs on China from 145% to 50 - 65%. He also mentioned that tariff negotiations had begun with China. Although China disputed the claim, it quietly reduced some tariffs, including a 125% levy on US semiconductors.

Additionally, the White House reported progress on potential trade deals with Japan, Korea, and India, which could act as models for other deals.

Fed signals potential rate cuts

Meanwhile, Fed Governor Christopher Waller indicated that the central bank might consider cutting interest rates if the economy weakens significantly. He stated, 'I'm not going to overreact to any increase in inflation that I think is attributable to the tariffs, but if I see a significant drop in the labour market, then the employment side of the mandate, I think, is important that we step in.' This followed a week after Fed Chair Jerome Powell expressed reluctance to lower rates.

While consumer and business survey data continue to plunge, the hard data has shown resilience, a trend likely to persist for a month or two until the effects of the Liberation tariffs become evident mid-year. If President Trump's tariffs are reduced, weaker hard data will be looked through, allowing the US economy and stock markets to muddle through the end of the year. However, if tariffs remain high, the risk of a recession and a retest of stock market lows increases significantly.

Key earnings and economic reports ahead

Looking ahead, earnings reports from major companies like Amazon, Apple, Microsoft, and Meta are scheduled this week.

Additionally, the week will feature the releasees:

• Core personal consumption expenditures (PCE) price index
• April non-farm payrolls (NFP) report previewed below.

Non-farm payrolls preview

Date: Friday, 2 May at 10.30pm AEDT

March's NFP report was mixed. The US economy added 228,000 jobs, well above the downwardly revised 117,000 in February and beating forecasts of 135,000. The unemployment rate rose to 4.2%, the highest level since November and slightly above market expectations of 4.1%. However, this was partly due to a rise in the participation rate, which increased to 62.5% from 62.4%.

After rising steadily in the first quarter (Q1) of 2024, the US unemployment rate has remained between 4.0% and 4.2% for the past 11 months, supporting Fed Chair Powell's recent observation while speaking at the Economic Club of Chicago earlier this month.
Powell described the US economy as 'solid' despite heightened uncertainty and downside risks. He noted that the labour market is 'at or near maximum employment' and 'broadly in balance.'

The expectation for April is that the US economy will add 135,000 jobs and the unemployment rate will remain at 4.2%. The US interest rates market starts the week pricing in a cumulative 85 basis points (bp) of rate cuts between now and year-end, with the first cut fully priced for July.

US unemployment rate chart

US Tech 100 technical analysis

In last week's update, we said that the decline from the 9 April, 19,234 high was best viewed as the fifth leg of an unfolding five-wave decline from the 22,222 record high, which warns of a retest and break of the 16,542 low towards 16,000. However, the rally above the 9 April, 19,234 high and above the Wave I or A low at 19,152 raises questions about the short-term bearish wave count - more so if it continues higher in the early part of this week.

Nonetheless, from here, while the US Tech 100 remains below the 200-day moving average (MA), currently at 20,193, medium-term downside risks remain, including a retest of the April 16,542 low.

A sustained break above the 200-day MA, 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

In last week's update, we said that the decline from the 9 April, 5481 high was best viewed as the fifth leg of an unfolding five-wave decline from the 6147 record high, which warned of a retest and break of the 4835 low towards 4750.

However, the rally above the Wave I or A low of 5504 raises questions about the short-term bearish wave count – more so if it continues higher in the early part of this week.

Nonetheless, from here, while the US 500 remains below the 200-day MA, currently at 5748, medium-term downside risks remain, including a retest of the April 4835 low.

A sustained break above the 200-day MA, 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 28 April 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.}