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MANHATTAN (CN) — With no real progress on peace in the Middle East, investors this week notched another round of gains on positive employment data.
Wall Street has moved on from what traders call TACO trades (“Trump always chickens out”) to NACHO trades (“Not a Chance Hormuz Opens").
By the closing bell on Friday, the Dow Jones Industrial Average gained 108 points for the week, while the Nasdaq rose by 1,133 points. The S&P 500 set another high points this week, gaining 168 points for the week to close at 7,398 points.
On Tuesday, after shipping container Maersk said one of its vessels passed safely through the Strait of Hormuz, markets rallied on the prospect of a peace deal. However, the fragile ceasefire between the United States and Iran evaporated by Friday, with Iran saying it seized an oil tanker and U.S. officials claiming two Iran-flagged tankers had been disabled by missile fire.
Beyond Iran, Wall Street was boosted by positive jobs data this week, first from payroll company ADP showing the private sector gained 109,000 jobs in April, then the federal employment report showing the U.S. labor pool grew by 115,000 jobs last month.
Revisions to previous jobs reports were not as large as they have been in recent months, either, leaving the three-month average at under 50,000 jobs gained.
One negative aspect to the report was that the number of employees working part-time for economic reasons increased by 445,000 in April, though so did the average workweek, giving mixed signals on whether workers were busier or not in April.
In other economic news, the monthly services index from the Institute for Supply Management fell slightly in April, about half a point, though the index has been in expansion territory for 22 straight months.
The energy price shock from the war in Iran has kept the prices component of the index elevated at more than 70 points, which experts say indicates a further increase in headline inflation.
“The anecdotal evidence shows some of the price increases will bleed through to other services in the coming months, with a range of respondents saying fuel surcharges were becoming more prevalent, and that pricing across the supply chain was beginning to adjust,” Michael Pearce, chief U.S. economist at Oxford Economics, wrote in an investor’s note.
A ruling from the U.S. Court of International Trade on Thursday striking down the 10% global tariff on U.S. imports didn’t dampen investor’s good vibes, either. Investors have largely ignored the turmoil over tariffs, already having baked most of the increased pricing into trades.
Experts say the ruling is just a minor setback for the Trump administration, though, since it applies only to those referencing the International Emergency Economic Powers Act (IEEPA).
“Even if upheld by the higher courts, the statute was only being used as a stopgap to fill the hole left by the IEEPA while the U.S. Trade Representative conducts Section 301 investigations, which would allow more durable tariffs to be imposed on anti-competitive grounds,” said Thomas Ryan, North American economist at Capital Economics.
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