Stocks Climb on Possible US-China Trade Talks and a Resilient US Labor Market

The S&P 500 Index ($SPX) (SPY) today is up +1.07%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +1.06%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +1.15%.  June E-mini S&P futures (ESM25) are up +0.99%, and June E-mini Nasdaq futures (NQM25) are up +1.09%. 

Stock indexes today are trading higher, with the S&P 500 and the Dow Jones Industrials posting 1-month highs and the Nasdaq 100 posting a 5-week high.  Stocks are climbing today on a possible thaw in the US-China trade stalemate.  China’s Commerce Ministry is assessing the possibility of trade talks with the US.  Today, it said, “The US has recently sent messages to China through relevant parties, hoping to start trade talks with China, and we are currently evaluating this.” 

Stocks added to their gains on signs the US labor market remains resilient with slack wage pressures after Apr nonfarm payrolls rose more than expected and Apr average hourly earnings rose less than expected.

US Apr nonfarm payrolls rose +177,000, stronger than expectations of +138,000, although Mar nonfarm payrolls were revised lower by 43,000 jobs to +185,000 from the previously reported +228,000.  The Apr unemployment rate was unchanged at 4.2%, right in line with expectations.

US Apr average hourly earnings rose +0.2% m/m and +3.8% y/y, slightly weaker than expectations of +0.3% m/m and +3.9% y/y.

The weakness in some megacap technology stocks is limiting the upside in the overall market.  Apple is down more than -4% after it reported falling China sales and warned that tariffs will increase costs.  Also, Amazon.com is down more than -1% after it gave a weaker-than-expected outlook for operating income and said it is bracing for a tougher business climate. 

The markets are discounting the chances at 3% for a -25 bp rate cut after the May 6-7 FOMC meeting.

Q1 earnings reporting season is in full swing.  According to data compiled by Bloomberg Intelligence, the market consensus is for Q1 year-over-year earnings growth of +6.7% for the S&P 500 stocks, down from expectations of +11.1% in early November.  So far, of the 303 companies in the S&P 500 companies that have reported quarterly results, 78% have beaten estimates.  Full-year 2025 corporate profits for the S&P 500 are seen rising +9.4%, down from the forecast of +12.5% in early January.  

Overseas stock markets today are higher.  The Euro Stoxx 50 climbed to a 1-month high and is up +2.08%.  China’s Shanghai Composite was closed for the Labor Day holiday.  Japan’s Nikkei Stock 225 rallied to a 5-week high and closed up +1.04%.

Interest Rates

June 10-year T-notes (ZNM25) today are down -16 ticks.  The 10-year T-note yield is up +6.9 bp to 4.287%.  June T-notes today are under pressure from a larger-than-expected increase in US Apr nonfarm payrolls.  Also, a possible thaw in the US-China trade war has curbed safe-haven demand for T-notes after China’s Commerce Ministry said it is assessing the possibility of trade talks with the US.  Today’s stock rally has also reduced safe-haven demand for T-notes.

Losses in T-notes are contained due to benign US wage pressures after Apr average hourly earnings rose less than expected.  T-notes also have carryover support from today’s rally in 10-year UK gilts to a 3-1/2 week high. 

European government bond yields today are mixed.  The 10-year German bund yield is up +5.0 bp to 2.494%. The 10-year UK gilt yield fell to a 3-1/2 week low of 4.408% and is down -1.8 bp to 4.463%.

The Eurozone Apr core CPI was revised upward to 2.7% y/y from the previously reported 2.4% y/y.

The Eurozone Apr S&P manufacturing PMI was revised upward by +0.3 to 49.0 from the previously reported 48.7.

The Eurozone Mar unemployment rate was unchanged at a record low 6.2%.

Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at the June 5 policy meeting.

US Stock Movers

Chip stocks are rallying today and are giving the broader market a boost.  Lam Research (LRCX) and Microchip Technology (MCHP) are up more than +4%.  Also, Nvidia (NVDA), Applied Materials (AMAT),  ON Semiconductor (ON), KLA Corp (KLAC), GlobalFoundries (GFS), Texas Instruments (TXN), and Micron Technology (MU) are up more than +3%.

Travel stocks are moving higher today on signs of economic strength after US Apr nonfarm payrolls rose more than expected.  Delta Air Lines (DAL), United Airlines Holdings (UAL), and Norwegian Cruise Line Holdings (NCLH) are up more than +4%.  Also, Southwest Airlines (LUV) and Carnival (CCL) are up more than +3%.

Dexcom (DXCM) is up more than +14% to lead gainers in the S&P 500 and Nasdaq 100 after reporting Q1 revenue of $1.04 billion, better than the consensus of $1.02 billion. 

Exact Sciences (EXAS) is up more than +10% after reporting Q1 revenue of $706.8 million, better than the consensus of $688.7 million, and raised its full-year revenue forecast to $3.07 billion-$3.12 billion from a previous estimate of $3.03 billion-$3.09 billion, stronger than the consensus of $3.06 billion. 

Duolingo (DUOL) is up more than +12% after boosting its full-year bookings estimate to $1.12 billion- $1.13 billion from a previous estimate of $1.08 billion-$1.10 billion, stronger than the consensus of $1.09 billion. 

US-listed Chinese stocks are climbing after China’s Commerce Ministry is assessing the possibility of trade talks with the US. As a result, PDD Holdings (PDD), JD.com (JD), Baidu (BIDU), and Alibaba Group Holding Ltd (BABA) are up more than +2%. 

Apple (AAPL) is down more than -4% to lead losers in the Dow Jones Industrials after reporting Q2 greater China revenue of $16.00 billion, weaker than the consensus of $16.83 billion. 

Amazon.com (AMZN) is down more than -1% after forecasting Q2 operating income of $13.0 billion to $17.5 billion, weaker than the consensus of $17.82 billion. 

Block (XYZ) is down more than -23% after reporting Q1 net revenue of $5.77 billion, weaker than the consensus of $6.22 billion, and cut its full-year adjusted operating income estimate to $1.9 billion from a previous estimate of $2.1 billion, below the consensus of $2.12 billion. 

Motorola Solutions (MSI) is down more than -8% to lead losers in the S&P 500 after forecasting Q2 adjusted EPS of $3.32-$3.37, weaker than the consensus of $3.47.

Take-Two Interactive Software (TTWO) is down more than -8% to lead losers in the Nasdaq 100 after announcing a delay in releasing the Grand Theft Auto VI game. 

Atlassian (TEAM) is down more than -7% after forecasting Q4 revenue of $1.35 billion to $1.36 billion, the midpoint below the consensus of $1.36 billion. 

Airbnb (ABNB) is down more than -2% after forecasting Q2 revenue of $2.99 billion to $3.05 billion, the midpoint below the consensus of $3.03 billion.

Earnings Reports (5/2/2025)

AES Corp/The (AES), Apollo Global Management Inc (APO), Cboe Global Markets Inc (CBOE), Chevron Corp (CVX), Cigna Group/The (CI), DaVita Inc (DVA), DuPont de Nemours Inc (DD), Eaton Corp PLC (ETN), Exxon Mobil Corp (XOM), Franklin Resources Inc (BEN), Monster Beverage Corp (MNST), T Rowe Price Group Inc (TROW).