Market Report for Thursday, May 8, 2025
Wall Street did as instructed when President Trump told investors to “go out and buy stock now.” Thursday’s rally wasn’t so much a policy endorsement as a standing ovation for lower tariffs—with a familiar showman working the tent.
Level Change 5/8/25 (%)
– – – – – – – – – – – – – – –
+0.6 Dow
+1.1 Nasdaq
+1.0 Nasdaq 100
+0.6 S&P 500
+1.2 S&P 400
+1.8 S&P 600
Indexes extended Wednesday’s modest gains, fueled by talk of tariff relief and the first deal breakthrough, with the UK. Washington and London announced a “framework agreement,” prompting the president to dust off his megaphone and tell traders to buy stocks immediately.
The bigger ticket was China. Bejing strongman Xi Jinping “very much wants to make a deal,” according to the president, who said he might hop on a call if weekend talks in Switzerland go well. He floated the idea of slashing China tariffs from 145% to a cuddlier 50–54% as early as next week. It’s the kind of fuzzy optimism investors now crave, a volatile de-escalation loop complete with its own campaign slogan: We Make Things Worse to Make Them Better Again.
Behind the scenes, systematic strategies reportedly re-leveraged into the rally, with resilient retail buyers and corporate buybacks doing their part. No major movement on the budget standoff, though Trump did dangle a plan to hike the top tax rate to 39.6%.
Between his tariff tax hikes and pending income tax hike, the Commander-in-Household-Budget-Destruction is defying all political convention. Raising taxes has long been considered electoral poison, but Trump looks intent on testing his 2016 theory—that he could shoot someone on Fifth Avenue and not lose any voters—on kitchen-table accounting: I can blow up household budgets coast-to-coast and not lose any voters. Test in progress.
In macro land, the Fed’s decision Wednesday to hold rates at 4.25–4.50% surprised no one. The statement was more interesting, acknowledging growing risks to both inflation and employment. Chair Powell’s press conference walked a traditional tightrope to non-commitment. The Fed sees little harm in waiting, he said, and plenty in guessing wrong. Asked which half of the dual mandate might falter first, Powell essentially shrugged. When a ship’s taking on water at both bow and stern, debating which end hits the seabed first feels academic.
That uncertainty echoed in fresh data.
Initial jobless claims fell to 228K, matching forecasts, but continuing claims came in hot. Q1 productivity dropped more than expected, and unit labor costs surged at their fastest pace in a year. A mixed bag that won’t invite sweet dreams at the Eccles Building.
The New York Fed’s April survey showed a slip in 5-year inflation expectations, but the 3-year rose to its highest since July 2022. Households are growing gloomier about jobs and finances, and inflation expectations remain sticky, just like the Fed’s policy dilemma.
One bright spot: earnings keep humming.
Nearly 90% of the S&P 500 has reported, with earnings growth tracking around 13.5%, up from just 7.2% at the quarter’s start. About 77% have topped estimates, with upside surprises averaging more than 8.5%. Most firms are busy sidestepping tariffs and muting macro noise. Resilience is the theme; relief, the wish.
Thursday’s message? Stocks can rally while confusion reigns—especially if a ringmaster in a red tie shouts “Buy!” loud enough.
— Jason Kelly
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