Nasdaq Hits 19,500, S&P 500 Holds 6,000, Dow Nears 42,800 as U.S.-China Trade Hopes Lift Stocks

Nasdaq, S&P 500, Dow Navigate Mixed Signals as Trade Talks and Inflation Data Dominate Market Focus

The major U.S. indices entered the week grappling with a delicate economic crosscurrent that has left both bulls and bears searching for conviction. The S&P 500 (SPX) opened just above the 6,000 mark, adding 1.03% to trade at 6,000.36, while the Dow Jones Industrial Average (DJIA) climbed 1.05% to 42,762.87. The tech-heavy Nasdaq Composite (COMP) surged by 1.20%, closing at 19,529.95, propelled in part by optimism surrounding U.S.-China trade negotiations and the resilience of the U.S. labor market.

Labor Market Resilience Clouds Fed Rate Cut Path

Despite President Biden’s renewed public push for the Federal Reserve to cut interest rates following the smallest private payroll gain in over a year, markets remain unconvinced that a policy pivot is imminent. The CME FedWatch Tool currently prices in just over a 50% probability of a cut by the September Fed meeting. The hesitation stems from persistent wage growth: May’s jobs report revealed average hourly earnings climbing 0.4% month-over-month and 3.9% year-over-year, up from April’s 0.2% monthly increase. Complementing this, ADP data showed job switchers enjoying 7% wage gains, with job stayers seeing 4.5% increases—figures unchanged from April.

Bank of America’s U.S. economist Shruti Mishra noted that strong income growth continues to support consumer spending, potentially anchoring the Fed in its current inflation-fighting posture. With headline inflation at 2.3% in April, real wage gains remain supportive of consumption, providing a buffer against recession fears.

S&P 500 Holds Above 6,000 as Investors Eye U.S.-China Trade Talks

The S&P 500 holding above 6,000 reflects both optimism and caution. While U.S.-China trade discussions in London are driving risk-on sentiment, with U.S. negotiators pressing Beijing to expedite rare-earth mineral exports, recent data paints a more nuanced picture. Chinese exports to the U.S. plummeted 35% year-over-year in May, marking the sharpest decline since the early pandemic months of February 2020. Yet Asian equities rallied ahead of the talks, with the Hang Seng Index gaining 1.6%, and China’s Commerce Ministry issued a goodwill gesture by approving new export licenses for rare-earth-related products.

Soft Manufacturing and Services Data Weigh on Broader Growth Outlook

Domestically, the ISM surveys provided fresh evidence of a decelerating U.S. economy. The ISM Manufacturing Index fell to 48.5, missing expectations and falling below the 50 threshold that signals contraction. The ISM Services Index also dipped below 50 for the first time since June 2024, registering at 49.9. Survey respondents cited rising tariffs as a key driver of increased business costs and a flattening in activity.

The mixed signals were echoed in commentary from ADP Chief Economist Nela Richardson, who highlighted that while the labor market remains resilient—layoffs are low, and wages are robust—there is no overwhelming signal compelling the Fed toward immediate action.

Premarket Movers: Tesla, Robinhood, AppLovin React to Index Rebalancing

Several high-profile stocks are moving sharply in early trading. Tesla (NASDAQ:TSLA) slid 3% to $295.14 after Baird analysts downgraded the stock to neutral. Robinhood Markets (NASDAQ:HOOD) dropped 3.27% to $74.88, and AppLovin (NASDAQ:APP) declined 0.91% to $417.89, after neither stock was added to the S&P 500 during the latest rebalancing by S&P Dow Jones Indices.

In contrast, Chinese tech and rare-earth stocks rallied on trade optimism. SMIC jumped nearly 5%, while China Rare Earth surged over 50% on the Hong Kong exchange. E-commerce giants Meituan and Alibaba also posted solid gains, contributing to a 3.2% intraday rise in the Hang Seng Tech Index before paring gains after weak Chinese trade data.

Bond Yields and Currency Markets Reflect Cautious Optimism

U.S. Treasury yields edged lower, with the 10-year yield slipping to 4.492%, down 2 basis points, and the 30-year yield holding near 4.96% ahead of a key auction this Thursday. The WSJ Dollar Index also softened by 0.28% to 95.32, reflecting a modest risk-on tone in global markets.

Gold futures remained range-bound, with Comex gold consolidating near $3,400/oz, as traders awaited further clarity from inflation data and trade talks.

Investors Focused on Inflation Data and Corporate Catalysts

The market’s near-term focus will shift sharply toward inflation data due later this week. The Consumer Price Index (CPI) for May will be released Wednesday, followed by the Producer Price Index (PPI) on Thursday. Both reports will heavily influence expectations for Fed policy through year-end.

Meanwhile, Apple’s (NASDAQ:AAPL) annual Worldwide Developers Conference (WWDC) looms large. Investors will scrutinize the company’s AI positioning, particularly as peers continue to integrate generative AI features at a rapid clip.

Stocks to Watch: Geopolitics, Tariffs, and Sector Moves

Among individual names, MP Materials (NYSE:MP) has drawn attention as rare-earth supply chains re-enter the geopolitical spotlight. Intuitive Machines (NASDAQ:LUNR), AST SpaceMobile (NASDAQ:ASTS), and Rocket Lab (NASDAQ:RKLB) have all rallied as investor interest in space-tech intensifies amid political headlines involving SpaceX.

Elsewhere, toy manufacturers face new headwinds as tariffs on Chinese goods disproportionately impact low-margin industries. Notably, 90% of U.S. doll imports originate from China, a factor likely to affect both pricing and consumer choice this holiday season.

Market Verdict: Nasdaq, S&P 500, and Dow Hold Steady Amid Crosscurrents

The resilience of U.S. equities, with the S&P 500 closing above 6,000 and the Dow Jones Industrial Average near 42,800, signals that markets are willing to look through mixed economic data in the near term. However, persistent wage growth, cooling manufacturing and services activity, and unresolved trade tensions with China remain key risk factors.

At this stage, I maintain a Buy stance on S&P 500 (SPX) and Nasdaq (COMP) exposure, given earnings resilience and strong AI-driven momentum in tech. For the Dow Jones Industrial Average (DJIA), I recommend Hold, as cyclicals face potential headwinds from slowing industrial activity and evolving tariff policies.

Further upside across U.S. equities will hinge on incoming inflation data, the trajectory of U.S.-China trade talks, and corporate earnings guidance into the second half of the year. Until then, expect tactical positioning to dominate market action across major indices.

That's TradingNEWS