Wall Street Retreats After Premarket Rally on Trump-Xi Phone Call Hopes
U.S. stocks reversed early gains Thursday morning after hopes stirred by a report of a rare phone call between President Donald Trump and Chinese President Xi Jinping. While the market initially responded positively to news of the leaders reconnecting, optimism quickly faded.
The phone conversation — reportedly their first official direct exchange since Trump took office — followed the president’s recent accusation that China violated a trade agreement, a claim that reignited trade tensions. For investors, any signs of renewed diplomacy offer hope that the looming threat of a full-scale trade war might still be averted. Trump has maintained that only direct communication with Xi could bring resolution to ongoing trade disputes. Xi, however, has traditionally deferred such discussions to his negotiating team, adding uncertainty to how much progress the call might actually signal.
By 9:59 a.m. ET, Wall Street had turned red. The Dow Jones Industrial Average slipped by 185.75 points, or 0.44%, settling at 42,241.99. The S&P 500 followed, down 15.18 points, or 0.25%, to 5,955.63. The Nasdaq Composite also fell, losing 27.63 points, or 0.14%, to land at 19,432.86. Meanwhile, the yield on the benchmark 10-year Treasury note eased to 4.349%, reflecting a cautious mood among investors.
Mixed Signals in the Labor Market
The economic picture grew murkier with the latest jobless claims report. Weekly claims rose by 8,000 to 247,000 — exceeding the Dow Jones estimate of 236,000. That uptick adds to a conflicting labor narrative. Earlier in the week, job openings for April came in stronger than expected, yet a separate private-sector jobs survey indicated a slowdown in hiring momentum.
All eyes now turn to the May nonfarm payrolls report, set for release on June 6. Economists anticipate a gain of 130,000 jobs and an unemployment rate holding at 4.2%. That report could offer a more definitive signal about the health of the U.S. labor market and influence future Fed policy decisions.
Adding another layer to the inflation outlook, the Bureau of Labor Statistics released a revised reading on unit labor costs. In Q1, costs surged 6.6%, well above forecasts. At the same time, productivity dropped by 1.5% — nearly twice the expected decline. When compensation outpaces productivity, it typically points to inflationary pressure, raising concerns about the potential for sticky inflation even as the economy cools.
Corporate Highlights
In corporate news, several major players released earnings updates and operational outlooks:
- Five Below, the discount retailer, delivered earnings that surpassed Wall Street expectations, giving a positive surprise in the retail space.
- MongoDB, a software firm, also topped quarterly estimates, providing a bright spot in the tech sector.
- PVH Corp, parent of brands like Calvin Klein and Tommy Hilfiger, beat expectations for the previous quarter but tempered optimism by cutting its profit outlook, citing the impact of tariffs.
- Winnebago Industries shared plans to reduce its workforce and adjust manufacturing operations in response to falling demand for recreational vehicles.
- Procter & Gamble announced it would slash 7,000 jobs — roughly 15% of its nonmanufacturing workforce — over the next two years as part of a cost-saving effort.
Crypto Corner
In the world of digital finance, Circle Internet Group, the firm behind stablecoin USD Coin (USDC), priced its initial public offering at $31 per share — significantly higher than the previously expected $27 to $28 range. The stronger-than-anticipated debut signals continued investor appetite for crypto infrastructure firms, even amid a volatile regulatory environment.