The May non-farm report severely hit rate cut expectations, causing the U.S. bond market to plummet. On Friday, the yields of the benchmark 10-year and more interest rate-sensitive 2-year U.S. Treasuries both rose by more than 16 basis points. By contrast, the U.S. stock market remained calm, briefly dropping in early trading but quickly regaining some lost ground. With the support of technology stocks, the S&P 500 and Nasdaq indices rose briefly during the day, with the former ending near historic highs. In general, a sharp rise in yields reduces the attractiveness of stocks and puts pressure on the stock market. The relative resilience of the U.S. stock market on Friday came from where?

By comparison, the U.S. stock market remained calm on Friday. After a brief dip in early trading, it quickly regained some of its lost ground.

With the support of technology stocks, the S&P 500 and Nasdaq indices briefly turned higher during the day and the former eventually closed near historic highs.

In general, a sharp rise in yields reduces the attractiveness of stocks and puts pressure on the stock market. What gave the relative resilience of the U.S. stock market on Friday?

The "soft landing" signal is flashing again, speculation is running high, and the U.S. stock market is holding firm.

"From an economic standpoint, the significant increase in employment and wage growth is a positive signal," said Charlie Ripley, senior investment analyst at Allianz Investment Management, in an interview with the media. "This is good news for corporate profits."

Despite the forced cooling of rate cut expectations, Ripley believes that the U.S. stock market remains confident about the prospect of an "economic soft landing".

On Wednesday, the May services PMI unexpectedly rebounded strongly, ending a trend of weak performance in multiple economic indicators. This positive data boosted market confidence and eased previous concerns about a "hard landing".

Interestingly, Friday's U.S. stock market was not entirely dominated by the non-farm report. There was also a fervor of speculation stirring up the markets.

Starting at noon Eastern Time on Friday, Keith Gill, also known as "Roaring Kitty", the leader of a group of retail investors, conducted a YouTube live-stream that lasted nearly 50 minutes, in which he showed his nearly $300 million position in GameStop. The live-stream attracted more than 600,000 viewers.

Some analysts believe that Gill's ability to attract viewers reflects a core fact about Wall Street: investors' interest and participation in risk assets, such as meme stocks, continues to be high, and bullish sentiment is spreading across various investment fields.

Other evidence includes Cathie Wood's Ark fund rising 3% this week, more money flowing into junk bonds and cryptocurrencies, and Citigroup's cross-asset volatility indicator hovering near its 2017 lows.

Priya Misra, portfolio manager at JPMorgan Asset Management, said: "The current focus of the market suggests that people are not concerned about the macroeconomy. We are currently in a 'soft landing' state and investors seem confident about it."

Rising yields have indeed put pressure on the U.S. stock market, but not as much as Gill's live-stream. His activities on social media have once again stimulated investors' interest in high-risk investments, fostering a speculative atmosphere. In the current economic situation, the market atmosphere is dominated by a small number of influential retail investors.

In addition, against the backdrop of the U.S. stock market hitting new highs this year, most investors in the market have fallen into a panic of fearing missing out on money-making opportunities.

Nathan Thooft, global head of asset allocation for Manulife Asset Management, which manages $160 billion in assets, said: "We currently have no plans to reduce risk. We do believe that if investors withdraw or choose not to participate in stock market trading, they will miss out on additional stock returns."

The bond market is more concerned about inflation and remains steady for the whole week.

Ripley believes that U.S. bond traders seem to have responded particularly to wage data in the employment report.

The non-farm report showed that the year-on-year growth rate of the average hourly wage in May exceeded expectations and rose to 4.1%. The April data was revised upward from 3.9% to 4%. The Fed hopes that the year-over-year wage growth rate will slow to 3% or lower, bringing U.S. inflation back to pre-pandemic levels.

Ripley said that the wage data has truly prompted the market's concern about inflation, "which means that the Fed's interest rate cut time has been further delayed."

According to the Federal Fund Futures, the last hope for the Fed to cut interest rates by 25 basis points in July disappeared after the release of employment data, and the expectation of a rate cut later this year has also cooled down significantly. The FedWatch tool on the CME showed that the probability of a 25 basis point rate cut in November and December has dropped to around 50%.

The rate decision for June will be held next week, and the Fed is likely to continue to hold steady, but investors will closely watch the Fed's policy statement, Powell's speech, and most importantly, the latest dot plot.

The latest dot plot released in March shows that the Fed expects to cut interest rates three times by a total of 75 basis points by 2024.

It is also worth noting that although bond yields rose sharply on Friday, yields for the week as a whole continued to decline: the 10-year U.S. Treasury yield fell by a cumulative 7 basis points, while the 2-year U.S. Treasury yield remained basically unchanged from last week. Overall, the bond market remained stable for the week, and the attractiveness of yields may not have widened the absolute gap with stocks.

Editor/Emily