Stock Market Update Friday June 6, 2025 Markets Rally as Jobs Data Sparks Risk-On Sentiment Equity markets opened sharply higher this morning following a slightly better-than-expected non-farm payrolls print, triggering a broad-based risk-on rally that held throughout the session. The S&P 500 (SPX) gained 1.0%, the Nasdaq-100 (QQQ) advanced 1.0%, and the Russell 2000 (IWM) outperformed with a 1.7% surge, reflecting renewed appetite for cyclical and small-cap exposure.

Away From Stocks: The risk-on tone reverberated across asset classes. Treasurys experienced widespread selling pressure, with yields climbing at both ends of the curve. The 2-year yield rose 12 basis points to 4.04%, while the 30-year yield increased 8 basis points to 4.97%, signaling a recalibration of rate expectations. In commodities, WTI crude oil rallied 2%, nearing $65 per barrel, reflecting optimism around economic activity. Meanwhile, gold softened to $3,312 per ounce, while Bitcoin rebounded strongly to $104,400, continuing its volatile trajectory. The U.S. Dollar Index (DXY) reclaimed the 99 handle, indicating a renewed bid for the greenback. Volatility, as measured by the VIX, declined to 16.80, its lowest level since February, reinforcing the market’s bullish sentiment.

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Labor Market Outlook: Mixed Signals, but Resilience Prevails While prior months' job gains were revised lower and household employment declined by nearly 700,000, today's headline payroll increase of 139,000 helped stabilize sentiment. Additionally, signs of easing labor

market contraction in recent Federal Reserve regional surveys suggest that employment conditions may be firmer than currently perceived by markets. Supporting this narrative, S&P Global’s latest PMI data pointed to an expansion in hiring, and the ISM Manufacturing report also reflected improved labor demand. Consequently, the 10-year Treasury yield (TNX) climbed 9 basis points, breaking above a short-term downtrend and implying upward pressure on yields in the near term. The U.S. Dollar strengthened across the board, while safe-haven assets such as Gold and the Japanese Yen weakened, indicating a broader rotation away from defensive positioning. Interestingly, Silver outperformed Gold, highlighting selective demand within precious metals.

The disagreement between Trump and Musk regarding the large spending bill is caused some market instability yesterday, but we believe it's temporary. Similarly, the sell-off in Tesla ($TSLA) is an overreaction.

Yesterday's market activity was unusual, driven by controversy surrounding the White House's major spending bill. Elon Musk has been publicly criticizing the bill's size and potential to bankrupt America through numerous tweets and comments. This led to a conflict with President Trump, which escalated rapidly today. Highlights include: Musk reiterated his criticism of the bill's size. Trump responded by suggesting Musk was upset about the removal of the EV mandate. Musk refuted this claim, calling it a lie. Trump then proposed terminating government subsidies and contracts with Musk's companies. Musk escalated the situation by alluding to Trump's potential involvement in the Epstein files, shocking many, including Alex Jones. Trump responded, stating he wouldn't mind Musk running against him. Musk then threatened to cancel or decommission the Dragon spacecraft, indicating a need for de-escalation. However, Trump refrained from further escalation.

Searches for "how to remove stickers from a car" and "Tesla" surged. People might be searching for Tesla because Musk is no longer associated with the White House and MAGA, potentially leading them to re-embrace the brand. The pullback in Tesla stock represents a buying opportunity. We advise staying on target.

Bottom Line: Constructive Outlook Amid Skepticism

Our proprietary algorithm has issued weekly buy signals across four of the five major U.S. equity benchmarks—namely the S&P 500 (SPY), Nasdaq-100 (QQQ), Russell 2000 (IWM), and Dow Jones Industrial Average (DIA).

Despite persistent concerns, key macro and sentiment indicators point to under-appreciated upside potential:

• The ISM Manufacturing Index remains below the 50 threshold, implying we're not yet in late-cycle territory.

• A housing supply shortage continues to underpin real asset strength.

• Declining margin debt suggests reduced speculative excess—typically not characteristic of market tops.

• Investor sentiment remains bearish, reinforcing the idea that this rally is climbing a classic "wall of worry."

This V-shaped recovery in equities continues to defy consensus expectations. Notably, Bitcoin, often viewed as a forward-looking risk proxy, has already made a new all-time high, reinforcing our outlook that equities could follow suit.

Catalysts Driving Continued Equity Upside

We believe the market rally will be fueled by a powerful combination of structural and sentiment-based tailwinds:

• Perception gap on tariffs: The actual economic impact appears materially lower than feared, reducing macro drag.

• Elevated short interest: Hedge funds remain defensively positioned, setting the stage for short-covering rallies.

• $7 trillion in cash remains on the sidelines—potential dry powder that could be reallocated into risk assets.

• Compared to February 2025, the investment environment has improved:

  • Tariff risks are now better understood.

  • Policy clarity on tax and deregulation has improved.

  • U.S. corporates have successfully weathered their fifth major macro stress test since 2020.

  • The Federal Reserve has adopted a more dovish policy stance heading into 2026, improving the liquidity backdrop.

In our view, market conditions favor continued upward momentum, with structural underpinnings and contrarian sentiment creating a fertile backdrop for further gains. Equity allocations should be maintained or modestly increased on pullbacks.

We anticipate that market pullbacks will be absorbed by hedge funds and institutional investors, driven by incrementally improved visibility into 2026. This optimism is fueled by expected tax cuts and deregulation, which are likely to enhance corporate profitability and stimulate investment activity. Our research indicates that equity markets have entered short-term overbought territory, increasing the likelihood of near-term profit-taking and consolidation. Our next W.D. Gann Cycle Pivot Date will be early next month. Tuesday, April 29, 2025, we have IWM & RSP ETFs; the two are the most important indexes to give buy signals. Now, we have all five major indexes with buy signals generated from our proprietary algorithm. Monday, April 28, 2025, we had a buy signal generated from our proprietary algorithm for the Dow Jones ETF DIA on the daily chart. The market structure continues to improve, breadth thrusts confirm internal strength, and technical conditions suggest that while short-term upside could be capped, the path of least resistance remains higher. April 25, 2025 Technical Outlook: SPY, QQQ, and DIA have daily buy signals. Sector ETFs (XLK, AIQ, SMH, XLY) have triggered buy signals. April 24, 2025, VIX has a daily sell signal (bullish for equities), as do Bitcoin and Apple. W.D. Gann Cycle Pivot Date: S&P 500 on Saturday, April 5, 2025. Historically, these cycle dates often coincide with significant inflection points in price action. While the market will be closed on Saturday, we will be watching for a potential pivot either into Friday’s close or by Monday’s session. Weekly sell signals persist across all five major indexes.