Nasdaq surges as new trade deal, jobs data fuel Fed rate cut hopes

Nasdaq and S&P 500 climbed, while Dow Jones was down as trade, weak jobs data fueled hopes of lower interest rates.

U.S. stocks were mixed amid positive news on U.S. trade deals and a weaker labor market. On Wednesday, June 2, the Dow Jones declined 40 points, or 0.10%, while the S&P 500 rose 0.33%. The tech-heavy Nasdaq rose the most, up 0.78%, due to hopes that the Federal Reserve might cut rates sooner than expected.

Fueling the hopes of a rate cut was positive news on trade. U.S. President Donald Trump claimed that he reached a preliminary trade deal with Vietnam. U.S. imports to Vietnam will be tariff-free, while Vietnamese imports to the U.S. will be subject to a 20% tariff.

the U.S. will also charge a 40% duty on transshipping, in an effort to block tariff evasion by other countries. Transshipping refers to routing goods originally manufactured in different countries, mostly China.

Weak jobs data fuel rate cut expectations

Progress on trade helps the U.S. avoid the inflationary effects of punitive tariffs, making the Fed’s rate cuts more likely. At the same time, weak employment figures from the payroll processing firm ADP contribute to this narrative.

Specifically, ADP figures revealed that the private sector lost 33,000 jobs in June, significantly missing the expected 100,000 increase. While layoffs were not common, reluctance to hire and replace existing workers has contributed to a drop in employment.

If a weak job market persists, the Fed may be forced to cut interest rates to boost the economy. This would benefit growth stocks, including Tesla, which was among the top performers today. Tesla’s shares rose 4.62% after the company produced more cars than expected.

Despite that, the company underperformed on vehicle deliveries, which dropped 14% over a quarterly period. The EV maker delivered 384,122 units, compared to Wall Street’s projected 389,407.