The U.S. stock rebound has gathered steam as the new month gets underway, confounding the old 'sell in May' adage, largely due to trade war de-escalation hopes and some selective tech optimism.
April's employment report on Friday will tell us a lot about the durability of this rally, as last month's jobs market picture remains mixed. A big jump in jobless claims last week was put down to seasonal quirks related to a late Easter.
Meanwhile, the broader economic picture continues to be less a cause for cheer than a case of 'it could have been worse'. ISM's manufacturing survey on Thursday showed an ongoing contraction in factory activity in April, but by slightly less than feared.
Signs of some rowback in the extreme U.S.-China trade standoff could be more of a boost, coming as they do alongside the week's impressive Microsoft and Meta earnings beats.
That said, the fortunes of Big Tech megacaps may be diverging. Apple disappointed the Street overnight, after it noted the high costs associated with shifting its supply chains, and its stock was down about 4% ahead of Friday's bell. And Amazon shares were also down 2% as its cloud business and income guidance fell short of expectations.
Pharma stocks were also hit on Thursday. Even though Eli Lilly results topped expectations, its shares tumbled 12% after CVS Health said it was dropping Lilly's obesity drug Zepbound from some lists of medicines covered for reimbursement.
And yet the more positive mood music around the trade war seems to have encouraged the broader market nonetheless.
Beijing is "evaluating" an offer from Washington to hold talks over President Donald Trump's steep tariffs, China's Commerce Ministry said on Friday, signalling a potential breakthrough in the severe faceoff.
The pressure to talk has been building as the Trump administration ended U.S. duty-free access for low-value shipments from China and Hong Kong, removing "de minimis" exemptions.
Taking it all in, however, S&P 500 futures were up another 0.5% ahead of Friday's open, adding to yesterday's cash market gains. Futures on the small cap Russell 2000 were up 1%.
All of which means the main Wall Street indexes have recovered most or all of the losses seen since the April 2 tariff sweep, even though they remain deeply negative for the year.
Given the unusually negative start for the year, many strategists wonder if seasonal trends captured in the "sell in May and go away" quip will hold this year. And most reckon the huge macro uncertainties mean it's equally impossible to apply it in reverse.
Flipping back to Friday's diary, the payrolls report will dominate early on, with consensus set for a drop in job growth last month to 130,000. 'Big Oil' dominates the earnings slate.
With next week's Federal Reserve meeting set to leave interest rates on hold for now, Treasury yields backed-up sharply on Thursday on a combination of relief at the ISM survey results and the stock market rally.
The Trump administration was not short of advice for the Fed.
Renewing his attack on Fed Chair Jerome Powell as "a guy in the Fed that I'm not a huge fan of", Trump said: "He should reduce interest rates. I think I understand interest a lot better than him, because I've had to really use interest rates."
Treasury Secretary Scott Bessent also said the Fed should cut. "We are seeing that two-year rates are now below fed funds rates, so that's a market signal that they think the Fed should be cutting," he said.
Maybe even more alarming for the bond market, Japan finance minister Katsunobu Kato said the country could use its $1 trillion-plus holdings of U.S. Treasuries as a card in trade talks with Washington, raising explicitly for the first time its leverage as a massive creditor to the United States.
The dollar fell back across the board, as the yen recouped some of its losses and China's offshore yuan hit its highest since March.
Elsewhere, Britain's FTSE 100 is heading for its 15th straight consecutive daily gain - which would be the longest winning streak since the index was first compiled in 1984.
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