New York close: Fed Waller blinks, Trump winks, and the rally finds room to run

Markets

After an early wobble on Thursday, the relief rally clawed back control, pushing U.S. equities higher for a third straight day. Tech led the charge once again, with the Nasdaq Composite out front. Investors re-engaged with risk on renewed signs that the Trump administration is open to dialling down tariff pressure—and perhaps just as importantly, that someone at the Fed is finally showing a willingness to front-run any potential damage.

President Trump threw the market a bone midweek, saying his team is “actively” speaking with Beijing about trade. This came after reports surfaced that Washington might be preparing to reduce some of its tariffs on China. While Beijing promptly poured cold water on that optimism—publicly stating there are no ongoing negotiations, let alone a deal in the works—traders aren’t exactly parsing official transcripts. What matters now isn’t the truth, but the trajectory of signalling. And the market is sniffing out a pivot.

The truth is, under barcode diplomacy, it doesn’t matter who’s bluffing. The optics of de-escalation are doing enough to anchor sentiment. Companies directly impacted by tariff policy—especially those that straddle cross-border supply chains—are already incorporating worst-case scenarios into their guidance. That’s clearing the fog and allowing the market to assume that Trump and Treasury Secretary Bessent are, at the very least, listening to Corporate America—or at least to the parts of it that still carry political weight ahead of an improtant mid-term election year.

But the real catalyst, or “ boost juice,” came from the Fed—not in the form of Powell’s usual tightrope routine, but from Governor Christopher Waller, who injected rare Fed clarity into the mix. In an interview on Bloomberg TV, Waller made it clear: if the labour market deteriorates because of a fresh round of tariffs, rate cuts are not only on the table—they’d come fast.

“I’m not going to overreact to any tariff-induced inflation,” Waller said, “but if we start seeing a serious rise in unemployment, I would expect more rate cuts, and sooner.” It’s precisely the kind of pre-emptive macro insurance traders have been waiting for. And it echoes what Bernanke once framed as the 98/2 rule—98% of monetary policy is about managing expectations, not just changing rates. Waller didn’t just speak; he reset the bar for how this Fed might respond if the Trump trade machine sparks another demand shock.

While the Fed as an institution has maintained a cautious, wait-and-see posture toward easing, Waller believes it will be both willing and able to respond decisively to signs of economic weakness, particularly if that weakness comes through the employment channel.

The economic data itself is hardly screaming recession. Initial jobless claims ticked up slightly to 222,000, but continuing claims fell to 1.841 million, beating estimates. Durable goods orders were a blowout at +10.4%, far exceeding the expected +2%. Beneath the hood, however, core orders excluding transportation flatlined at 0.0%, missing forecasts and cooling some of the headline enthusiasm.

Still, the broader takeaway is simple: the first volley of tariffs didn’t break the real economy. If this was supposed to be a sledgehammer, someone forgot to send the memo to U.S. industry. There’s still evidence of resilience—particularly in domestically anchored manufacturing and defense-sensitive segments, which align neatly with the administration’s “Made in America” push.

Equity markets responded in kind. The S&P 500 ripped higher, closing in on levels last seen April 2—right before Trump’s latest tariff barrage. Big tech led the way again, with traders positioning ahead of Alphabet earnings and reloading into AI, cloud, and semiconductors. Treasury yields slipped as Waller’s comments introduced fresh dovish risk into rate expectations.

CTAs are in motion, too. The short-term model flipped bullish after cracking through several buy-in levels: the rally has room to run, and systematic buying could accelerate if momentum persists.

That’s also why the recent rotation call—out of U.S. tech and into Europe is already starting to look like a bad joke. Let’s be honest: the future isn’t going to be defined by how many low-margin widgets China or Europe can ship. The next frontier is semiconductors, sovereign AI, quantum infrastructure, and encrypted data flows.

This isn’t about tariff spreadsheets anymore. It’s a full-spectrum tech war, where national security, digital sovereignty, and economic leverage are all bleeding into one strategic theater. Tech isn’t just a sector—it’s the spine of future power. And the U.S., for now, still owns most of that map.

In that context, the idea that Europe will lead this charge is wishful at best. If anything, Europe looks like a bystander—caught between two digital superpowers, slow-walking industrial policy, and already showing signs of fragmentation in AI regulation and chip funding.

Regarding gold, it paused despite the weaker Treasury auction. The 7-year auction, on the other hand, attracted soft foreign demand—the weakest since December 2021—and tailed for a second consecutive auction. Waller’s comments helped contain the panic, which was negative for gold, as the dollar traded within a tight range, caught between optimism over trade and growing expectations that the Fed will re-engage.

The narrative about Treasury dysfunction is still there, but it hasn't broken out yet. Instead, it’s being absorbed into volatility suppression mode—at least until the next catalyst breaks the calm.

For now, the market has decided: Trump’s playing his hand close to the chest, but the “ Art of the Deal” signals are real. Waller’s not the whole Fed, but he’s the adult in the room. And the positioning unwind has made room for a chase.

The dumb money’s already rotated. The smart money is back in tech.
And unless someone pulls the plug fast, this rally’s still got legs.

The view

There’s always been a difference between reporting the news and steering the market—but in recent cycles, that line is blurring fast. When one dominant media outlet controls the distribution and tone of financial headlines, it starts to shape not just sentiment, but the structure of the narrative itself. Headlines get louder, op-eds lean harder, and a curated cast of doom-happy analysts fill the feed.

It’s not that the facts are wrong—it’s that the framing becomes the signal. And when the same framing gets pushed across terminals, squawk boxes, and sell-side morning calls, the tape starts to bend. Markets stop reacting to news and start reacting to the way the news is being presented. That’s not price discovery. That’s echo-driven tape painting.

Take tariffs. The dominant narrative right now paints them as a surefire route to recession. But if tariffs were truly an economic death sentence, why does every major country on Earth still use them? Context matters. Calibration matters. But in a one-sided media flow, nuance gets buried beneath the next doom headline.

Of course, seasoned traders know better. We’ve already front-run the next news cycle, because—let’s be honest—it’s traders who create the news, not the other way around. The real-time order flow, positioning stress, and liquidity gaps write the story long before a journalist types up the “why.”

And that’s the key: from a pure trading perspective, we shouldn’t obsess over why the market is moving. What matters is what the market is doing. News is, by nature, a lagging indicator—by the time it hits your screen, someone’s already traded it. The stories we read are often clever attempts to explain price action after the fact. And while journalists aim to be right, traders aim to make money. Those are very different goals.

So when the media noise gets loud, remember: the market’s interpretation of the news is what matters, not the news itself. What we think, what the op-ed thinks—it’s irrelevant. The only thing that counts is how price reacts.

In other words: lose your opinion before you lose your capital.

Because the tape never lies—no matter who’s writing the headlines.