Exchange-Traded Funds, US Equities Rise After Midday Friday

The US equity markets surged on Friday, with the S&P 500 extending its winning streak to nine days—the longest since 2004—as investors digested a resilient April jobs report and cautiously optimistic trade signals. Exchange-traded funds (ETFs) tracking broad-market indices, such as SPDR S&P 500 (SPY) and Invesco QQQ (QQQ), rose sharply, reflecting a shift in sentiment toward labor market durability amid escalating trade tensions. However, the rally masked underlying vulnerabilities, including slowing wage growth and corporate warnings about tariff-driven costs.

The Jobs Report: Strength and Strains

The Bureau of Labor Statistics reported that nonfarm payrolls rose by 177,000 in April, exceeding economists’ expectations of 135,000. The unemployment rate held steady at 4.2%, but the report highlighted fissures beneath the surface. Average hourly earnings grew at an annualized rate of 3.8%, down from 4% in March—a slowdown that reflects worker reluctance to switch jobs amid economic uncertainty. Meanwhile, the average workweek dipped slightly, suggesting employers are scaling back hours ahead of potential layoffs.

The leisure and hospitality sector, a bellwether for consumer confidence, added just 17,000 jobs—a sharp deceleration from recent months—as tariffs on imported goods and rising input costs strained businesses. Federal workforce reductions, driven by budget cuts, cost 15,000 jobs in Q1, foreshadowing further declines.

Sector-Specific Gains and Losses

The tech-heavy Nasdaq Composite rose 1.6%, led by chipmakers like Nvidia (NVDA) and Broadcom (AVGO), which gained 1.8% and 2.1%, respectively, as AI investments offset tariff concerns. Meta Platforms (META) also climbed 1.5%, benefiting from strong AI-related demand.

However, Apple (AAPL) fell 2.3% after warning of a $900 million tariff-related cost increase for the quarter. Amazon (AMZN) dropped 4% despite beating earnings estimates, as management cited “macroeconomic uncertainty” in its outlook. The energy sector lagged, with Chevron (CVX) down 4.3% amid collapsing oil prices ($58.70/barrel, a four-year low), while Exxon Mobil (XOM) eked out a 0.5% gain.

Bond Markets and Inflation Concerns

The 10-year Treasury yield held steady at 4.23%, reflecting a standoff between inflation fears and recession risks. Gold, a traditional safe haven, surged to $3,270/oz, nearing record highs, as investors braced for tariff-driven inflation. Economists at the Federal Reserve face a dilemma: rising prices from tariffs may limit their ability to cut rates if a slowdown materializes.

Risks on the Horizon

Despite Friday’s rally, analysts caution that the economy remains fragile. The first-quarter GDP contracted by 0.3%, marking the first downturn in three years. Continuing unemployment claims hit 1.916 million, the highest since late 2021, signaling prolonged job searches. Corporate layoffs at UPS (20,000 jobs) and potential cuts at Intel (20,000) underscore structural challenges.

Trade tensions loom largest. President Trump’s tariffs—145% on Chinese goods and a 10% baseline on all imports—have heightened recession risks. China’s commerce ministry, while leaving the “door open” for trade talks, insists on tariff rollbacks, leaving businesses in a holding pattern.

Conclusion: A Delicate Balancing Act

The Friday rally in ETFs and equities reflects investors’ faith in labor market resilience, but the data reveals cracks. While the S&P 500’s nine-day streak and a 1.5% gain highlight optimism, slowing wage growth, federal workforce reductions, and sector-specific declines (e.g., energy, leisure) suggest vulnerabilities.

The Federal Reserve’s hands are tied: tariffs fuel inflation while squeezing consumer spending. With GDP already in contraction and unemployment claims rising, the window for a soft landing is narrowing. Investors should prioritize defensive sectors like healthcare and technology (excluding tariff-sensitive firms) while remaining cautious on energy and cyclicals. The market’s optimism may outlast the data’s reality.

In short, Friday’s gains are a pause in a storm, not the end of it.