U.S. markets and stock exchange traded funds continued their back-to-back rally Friday after poor jobs growth data fueled bets of an interest rate cut and Washington decided to delay tariffs on Chinese goods.
On Friday, the Invesco QQQ Trust (NASDAQ: QQQ) increased 2.1%, SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) was up 1.1% and SPDR S&P 500 ETF (NYSEArca: SPY) rose 1.2%. Both the Dow Jones Industrial Average and the S&P 500 were also testing their short-term resistance at the 50-day simple moving average.
The equity markets strengthened on hope that the Federal Reserve will go ahead with its interest rate cuts to support an ailing economy. The Labor Department revealed nonfarm payrolls increased by 75,000 jobs last month, or much smaller than the expected 185,000 additions, revealing a slowdown in economic activity that was spreading to the labor market, Reuters reports.
“It was a goldilocks number. The number was weaker than expected and we are one step closer to the Fed cutting rates before the end of the year,” Larry Adam, chief investment officer at Raymond James, told Reuters. “An interest rate cut is being priced into the market, but in order to go higher you do need to get progress on the trade front because in the longer term that is the bigger issue for markets.”
In response to the weak jobs report, traders raised bets that the Fed could cut rates in July followed by two more rate cuts by the year’s end.
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Further bolstering the risk-on sentiment, traders grew more optimistic over a potential continuation of trade talks between the U.S. and China after Washington said Chinese exporters were given two more weeks to get their products into the country before a tariffs hike.
“The fact that they are talking and the tariffs don’t go into effect immediately is being seen as progress on trade,” Adam added.
Furthermore, on the Mexico side, a senior White House official revealed that if talks go well, President Donald Trump could forgo the planned tariffs on Mexican imports on Monday.
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