US stock market: Optimism runs high, but all eyes on inflation and layoffs

2 minutes read

11 June 2025

US stock market: Optimism runs high, but all eyes on inflation and layoffs

Wall Street is buzzing this Wednesday. The S&P 500 and Nasdaq are riding a three-day winning streak, fuelled by hopes around US-China trade talks and a resilient tech sector. But beneath the surface, there’s a sense that the market might be running a little too hot—and investors are bracing for a reality check as fresh inflation data lands.

Trade talks and tech rallies set the pace

The S&P 500 edged up 0.2%, and the Nasdaq climbed 0.3% on Tuesday, with traders hungry for any sign of progress in the ongoing US-China negotiations. Officials from both sides met in London for a second day, and Commerce Secretary Howard Lutnick sounded upbeat: “We’re working towards a resolution, and while it may take another day or two, the tone is constructive”.

This optimism has spilled into the broader market. Tesla, in particular, has been a standout, bouncing back for a third straight session and nearly wiping out its early June losses. It’s not just about the giants, though. The NFIB Small Business Optimism Index showed its first rise since September, a sign that even Main Street is feeling the benefit of easing trade tensions.

But not everyone is convinced the rally can last. As CNBC’s Jeff Cox put it, “The US stock market seems to be betting on more trade breakthroughs and favourable inflation data. But the bond market and CEOs might not be so sure about that”6. The bond market, often seen as the cautious cousin, is flashing warning signs—especially with interest rates and borrowing costs poised to climb if inflation surprises on the upside.

Inflation and layoffs: The next big test

The real test for this rally comes later today, when the May Consumer Price Index (CPI) drops. Analysts expect inflation to have accelerated last month, which could force the Federal Reserve to keep rates higher for longer. That’s a big deal for stocks, especially with so many global uncertainties still in play.

Meanwhile, another trend is quietly shaping the market, a wave of layoffs at major US companies. Google and Paramount have joined Microsoft, Citigroup, and Disney in announcing job cuts this year. Paradoxically, Wall Street often cheers these moves—cost-cutting can boost profits in the short term, even if it signals caution about the future. Bar chart comparing the number of layoffs in 2025 across major companies, with Citigroup at the top with 20,000 layoffs, followed by Microsoft with 6,500, and smaller layoffs at Google, Paramount, and Disney.

As one market strategist told CNBC, “Layoffs can paradoxically lead to an uptick in stock values as they are viewed as measures to cut costs”. But for many, it’s a reminder that companies are preparing for potential bumps ahead, not just celebrating the good times.

With the S&P 500 now just 2% shy of its record high, today’s inflation report and the outcome of trade talks could set the tone for the rest of the month. If price pressures cool and trade progress holds, the rally might have more room to run. But a hot inflation print or faltering negotiations could bring volatility roaring back.

For now, Wall Street is walking a tightrope—balancing hope with caution, and waiting for the next headline to tip the scale.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.