US Equities Markets End Higher as Strong Jobs Report Eases Tariff Fears

The US stock market surged on Friday, May 2, 2025, as a stronger-than-expected jobs report and hints of easing trade tensions between the US and China fueled optimism. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite all closed higher, with tech stocks leading the charge. The gains marked the ninth consecutive trading day of increases for the S&P 500—the longest such streak since 2004—and erased its losses since President Trump’s “Liberation Day” tariff announcement on April 2.

The catalyst was the April employment report, which showed nonfarm payrolls rose by 177,000, exceeding economists’ expectations of 138,000. While this figure was tempered by downward revisions to prior months’ data—February and March gains were reduced by a combined 58,000—the headline number underscored labor market resilience amid ongoing trade policy uncertainty. The unemployment rate held steady at 4.2%, within a narrow range since May 2024, while average hourly earnings rose 0.2% month-over-month, leaving annual wage growth at 3.8%.

The Jobs Report: Strength and Subtleties

The April gains were driven by sectors such as health care (+51,000), transportation and warehousing (+29,000), and financial activities (+14,000). Federal government employment, however, fell by 9,000—the latest in a decline of 26,000 since January. Meanwhile, long-term unemployment (27+ weeks) rose by 179,000 to 1.7 million, a worrying sign of persistent labor market divides.

The report also revealed a 23.5% share of total unemployed stuck in long-term unemployment, highlighting structural challenges. Yet, the stability of the unemployment rate and moderate wage growth eased fears of an overheating economy, potentially delaying Federal Reserve rate hikes.

Market Reaction: Tech Leads, Trade Tensions Ease

The tech-heavy Nasdaq Composite surged 1.5%, led by AI-driven stocks like Microsoft (+7.6%) and Meta Platforms (+9%), which reported strong earnings. The S&P 500 rose 0.6%, its longest winning streak since November 2024, while the Dow gained 0.2%.

Investors took heart from hints of progress in US-China trade talks. China’s commerce ministry stated the “door is open” to negotiations if the US rolled back tariffs, reducing near-term recession fears. This optimism offset concerns about a 0.3% annualized GDP contraction in Q1 2025 and elevated jobless claims (241,000), which hit a 14-month high.

Risks Remain: Tariffs, Wages, and Equity Valuations

While the jobs report signaled labor market stability, risks linger. A $900 million tariff-related cost at Apple and a $10 billion cut to its buyback program underscored the sectoral pain from trade policies. The 10-year Treasury yield rose to 4.30%, suggesting investors remain wary of long-term growth.

Wage growth, while moderate, could still test corporate margins. The 3.8% annual rise in hourly earnings lags pre-pandemic norms, but sustained growth could pressure companies already grappling with tariff-driven input costs. Meanwhile, the S&P 500’s price-to-earnings ratio of 19.2x remains elevated by historical standards, leaving equities vulnerable to further economic or geopolitical shocks.

Conclusion: Resilience Amid Uncertainty

The May 2 market rally reflects a confluence of factors: the labor market’s durability, tentative trade optimism, and tech-driven earnings. The jobs report’s headline strength—despite revisions—supports the view that the US economy retains enough momentum to avoid a sharp downturn. However, the path ahead is fraught with risks, particularly if tariffs escalate or wage growth accelerates.

The key metrics reinforce this cautious outlook:- Nonfarm payrolls at 177,000 vs. 138,000 estimates: A positive surprise, but below the 2024 peak of 300,000+.- Long-term unemployment at 1.7 million: A red flag for policy makers.- S&P 500’s 3.3% year-to-date decline: Reflects lingering uncertainty about tariffs and growth.

Investors should balance optimism about labor market resilience with vigilance over trade policy and corporate profit margins. The Fed’s next move—whether to cut rates or maintain patience—will hinge on data like this month’s jobs report. For now, the market’s gains are a testament to the belief that the US economy, while far from robust, can navigate these crosswinds.