Author: Matthew Collom

U.S. Inflation Rises as Corporate Earnings Fuel Market Highs

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United States

Strong Earnings Lift Markets to New Highs
The S&P 500 and Nasdaq Composite both hit new all-time highs last week, driven by strong Q2 earnings and generally positive economic data. The Russell 2000 also rose, while the Dow Jones Industrial Average and S&P Midcap 400 ended slightly lower.

The earnings season kicked off with major banks like JPMorgan Chase and Citigroup reporting better-than-expected results. Later in the week, consumer-facing companies such as PepsiCo, United Airlines, and Netflix also topped forecasts.

NVIDIA rallied after receiving approval from the Trump administration to sell its H2O AI chips to China. The company, which recently hit a $4 trillion market cap, surged on the news.

Inflation Picks Up; Retail Sales Rebound
June CPI rose 0.3% month over month—its biggest jump in five months—matching expectations. On a year-over-year basis, inflation accelerated to 2.7%, while core CPI rose to 2.9%, up from 2.8% in May. Prices for household goods, recreation, and footwear saw notable increases, partly offset by declining vehicle prices.

Retail sales rose 0.6% in June, rebounding from May’s 0.9% drop. Midweek market jitters over reports that President Trump might remove Fed Chair Jerome Powell were quickly reversed after Trump denied the rumor.

Corporate Bonds Outperform Treasuries
Intermediate- and long-term Treasury yields held steady, while short-term yields edged lower amid speculation around the Fed. Investment-grade corporate bonds outperformed Treasuries, with new issues largely oversubscribed.

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Europe

Markets Mixed as Investors Eye Trade Talks
The STOXX Europe 600 finished flat, as investors monitored progress in U.S.-EU trade discussions. Italy’s FTSE MIB rose 0.58%, France’s CAC 40 and Germany’s DAX were little changed, and the UK’s FTSE 100 gained 0.57%, helped by a weaker pound.

UK Inflation Surges; Labor Market Softens
UK inflation surprised to the upside, rising to 3.6% in June—the highest since January 2024—driven by higher fuel prices. Core services inflation held at 4.7%, showing persistent cost pressures.

The job market weakened. The unemployment rate ticked up to 4.7%, and payrolls fell by 41,000 in June. Wage growth (excluding bonuses) came in at 5.0%, slightly above forecasts but down from 5.3% in May.

Eurozone Industrial Output Rebounds
Industrial production in the euro area rose 1.7% in May, beating expectations and reversing April’s 2.2% drop. Strong output in energy, capital goods, and non-durable consumer goods contributed to the gain. Year over year, output rose 3.7%.

The region’s trade surplus widened to €16.2 billion, up from €12.7 billion a year ago, as exports grew and imports fell.

German Sentiment at 3-Year High
Germany’s ZEW economic sentiment index rose for the third month in a row, reaching 52.7—the highest since February 2022. Optimism was driven by hopes for EU stimulus and resolution of U.S.-EU trade tensions.

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Asia-Pacific

Japan: Modest Gains Ahead of Elections
Japanese equities posted moderate gains, with the Nikkei 225 up 0.63% and the TOPIX rising 0.40%. Investors await results from the July 20 Upper House election, which could impact Prime Minister Shigeru Ishiba’s coalition majority.

The 10-year JGB yield rose to 1.53%, while the yen weakened toward 148 per U.S. dollar.

Cooling Inflation, Weak Exports
Core CPI rose 3.3% in June, below expectations and down from 3.7% in May, due mainly to lower energy costs. Exports fell 0.5% year over year, missing forecasts, with declines in autos, parts, and pharmaceuticals. A new 25% U.S. tariff on Japanese goods is set to take effect August 1, though bilateral talks are ongoing.

China: Solid GDP, But Risks Loom
Mainland Chinese markets advanced, with the CSI 300 up 1.09% and the Shanghai Composite up 0.69%. Hong Kong’s Hang Seng jumped 2.84%.

China’s Q2 GDP grew 5.2% year over year, slightly above expectations, easing near-term pressure for stimulus. However, deflation concerns, soft retail sales, and upcoming U.S. trade deadlines pose headwinds.

The real estate downturn persists: new home prices fell 0.27% in June, while existing home prices dropped 0.61%. Residential sales fell 12.6% year over year—the largest decline in 2025 so far.

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Other Key Markets

Indonesia: Rate Cut and U.S. Trade Deal
Indonesia’s central bank cut its benchmark rate from 5.50% to 5.25%, citing lower inflation forecasts and the need to support growth. Separately, the U.S. and Indonesia finalized a trade deal that set tariffs at 19%—down from an initially proposed 32%. Indonesia also agreed to purchase Boeing aircraft and import over $20 billion in U.S. energy and agricultural goods.

Peru: Central Bank Holds Steady
Peru’s central bank kept its policy rate at 4.50%, as expected. Annual inflation remained at 1.7% in June, with stable 12-month inflation expectations at 2.3%. Policymakers noted that global inflation expectations—particularly in the U.S.—may slow the path back to target inflation locally.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

U.S. stocks ended Friday on a mixed note, with the S&P 500 closing flat amid renewed trade tensions with Europe. Despite the muted session, the benchmark index posted a gain for the week.

By the closing bell, the Dow Jones Industrial Average fell 142 points (0.3%), the S&P 500 was virtually unchanged, and the NASDAQ Composite ticked up 0.1%.

Market sentiment took a hit after the Financial Times reported that President Donald Trump is considering tariffs of 15% to 20% on goods imported from the European Union. The proposed levy—well above the 10% the EU had hoped for—suggests trade negotiations may have stalled. With the August 1 deadline fast approaching, the move appears designed to pressure the EU into making broader concessions.

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Earnings Season Gathers Momentum

Investors continue to digest second-quarter earnings, which have been largely better than expected so far:

• American Express (AXP) climbed after the credit card company beat profit estimates, fueled by strong spending from high-income consumers.
• 3M (MMM) rose after raising its full-year earnings outlook, benefiting from cost-cutting efforts and a shift toward higher-margin products.
• Charles Schwab (SCHW) advanced after reporting strong quarterly results driven by asset growth and improved net interest margins.
• Netflix (NFLX) delivered solid earnings and raised its revenue guidance for the year, but shares pulled back slightly as results fell short of sky-high analyst expectations. Even so, Netflix stock is up over 43% year-to-date, supported by confidence in its dominance in the streaming sector.

Looking ahead, the earnings calendar remains busy next week, with reports expected from Coca-Cola (KO), Texas Instruments (TXN), Alphabet (GOOGL), and Tesla (TSLA).

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Consumer Sentiment Improves as Inflation Expectations Ease

The University of Michigan’s consumer sentiment index rose to 61.8, slightly above expectations of 61.5. One-year inflation expectations dropped to 4.4%, down from 5.0% previously—an encouraging sign for consumers and policymakers.

Recent economic data has shown resilience: retail sales beat forecasts, weekly jobless claims declined, and June inflation remained largely in line with estimates. However, tariffs are beginning to put upward pressure on select consumer goods.

Amid these developments, the Federal Reserve has adopted a cautious, wait-and-see stance. Still, Fed Governor Christopher Waller said Thursday that a rate cut at the Fed’s next meeting could be warranted, citing growing risks to the economy.

Waller also emphasized that the recent inflation uptick driven by tariffs is likely temporary and shouldn’t alter the Fed’s broader policy outlook.

Meanwhile, President Trump continues to push the Fed to act more aggressively in lowering interest rates to support economic growth.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

U.S. stocks closed lower on Friday, capping a losing week for the S&P 500 as renewed fears of a global trade war rattled investors. The market decline followed President Donald Trump’s announcement of a 35% tariff on Canadian imports beginning August 1.

At the close, the Dow Jones Industrial Average dropped 279 points (0.6%), while the S&P 500 slipped 0.4% and the NASDAQ Composite shed 0.2%.

Trump Imposes 35% Tariff on Canada, Heightens Trade Tensions

Both the S&P 500 and NASDAQ retreated from record highs after Trump unveiled a letter detailing new tariffs on Canadian goods, effective next month. These duties add to existing sector-specific tariffs and aim, according to the president, to pressure Ottawa into curbing fentanyl trafficking into the U.S.

Trump also accused Canada of unfair trade practices, citing already high Canadian tariffs on various American sectors.

This week, the administration issued similar letters targeting other major economies: a 25% tariff on goods from South Korea and Japan, and a 50% duty on Brazilian imports. Brazil warned it would respond with equal measures if the U.S. proceeds.

Trump added that the European Union could also be hit with tariff notices as soon as Friday, casting doubt over the direction of trade negotiations with Washington.

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Banks to Kick Off Q2 Earnings Season

Looking ahead, the second-quarter earnings season begins next week. Major banks including JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C), and Bank of New York Mellon (BK) are all scheduled to report Tuesday.

In individual stock moves, Levi Strauss (LEVI) gained after raising its sales outlook, signaling it can absorb some of the tariff impact in the near term.

PENN Entertainment (PENN) tumbled more than 7% amid concerns over slowing growth, following weaker-than-expected gaming revenues in Iowa and Indiana.

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All Eyes on Next Week’s Inflation Data

Friday’s economic calendar was light, but investors are already looking ahead to next week’s Consumer Price Index (CPI) report for June, which is expected to show a 0.3% monthly increase.

Minutes from the Fed’s June meeting revealed only a few officials were open to cutting interest rates this month. Most remained cautious, citing potential inflationary pressures stemming from the new tariffs.

Fed fund futures currently price in a low probability of a July rate cut, though a move in September appears increasingly likely.

This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.

U.S. stocks ended at all-time highs Wednesday, led by a strong tech rally after Nvidia became the first semiconductor company to top a $4 trillion valuation. The surge helped markets shake off concerns over President Donald Trump’s latest tariff moves.

At the close, the Nasdaq 100 Futures jumped 0.95% to a record 20,611.34. The Dow Jones Industrial Average added 217 points (0.5%) and the S&P 500 gained 0.6%.

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Nvidia Hits $4 Trillion, Fuels AI-Driven Tech Rally

Nvidia (NASDAQ: NVDA) rose 2%, lifting its market value above $4 trillion and reaffirming its lead in AI chip dominance. The rally sparked broader gains in the tech sector.

“This is a historic moment,” said Wedbush analysts. “It reflects the AI Revolution entering its next phase, powered by Nvidia’s chips.”

Meta Platforms (NASDAQ: META) and other major tech names also traded higher.

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Fed Minutes: Rate Cuts Still Likely This Year, but Divisions Emerging

Minutes from the Fed’s June 17–18 meeting show most officials expect rate cuts later in the year, though opinions are beginning to diverge. Some policymakers favor cuts as early as July, while others see no need to ease policy just yet.

President Trump has been vocal in criticizing the Fed’s caution, again calling for lower rates and even for Chair Jerome Powell’s resignation. He recently cited a study claiming tariffs have not fueled inflation.

According to The Wall Street Journal, Trump’s adviser Kevin Hassett has emerged as a leading candidate to replace Powell, overtaking former Fed governor Kevin Warsh.

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Copper Becomes Latest Target in Trump’s Trade War

Markets started the week on shaky ground after Trump issued new tariff threats to major global partners. Although the effective date was pushed from July 9 to August 1, the president insisted no further delays are coming.

Trump also raised the possibility of a 50% tariff on imported copper, spotlighting his administration’s sector-specific trade strategy. Copper is vital to industries like electric vehicles, military, and infrastructure.

More tariffs—potentially on pharmaceuticals and semiconductors—may soon follow. Treasury Secretary Scott Bessent claimed tariffs have generated $100 billion so far in 2025, with a target of $300 billion by year-end.

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Goldman Sachs: Limited Upside for Stocks in the Near Term

Despite the recent surge, Goldman Sachs warned of limited near-term upside in equities due to stretched valuations and macroeconomic risks.

While neutral over the next three months, strategists led by Christian Mueller-Glissmann remain optimistic over the next year, citing long-term structural drivers, policy support, and strong shareholder returns.

Still, they caution: “In late-cycle phases, valuations tend to overshoot, and with weakening inflation trends abroad, the risk of a market pullback is now greater than that of a major rally.”

U.S. stocks ended Tuesday mixed as investors weighed the economic consequences of President Donald Trump’s renewed tariff threats. The S&P 500 slipped 0.1%, the Dow Jones Industrial Average fell 165 points (0.4%), and the Nasdaq inched up 0.03%.

Trump Holds Firm on Tariff Deadline

President Trump announced that his administration will not extend the August 1 deadline for implementing new reciprocal tariffs, which had previously been delayed from July 9. The decision has reignited concerns over a potential escalation in global trade tensions if negotiations stall.

On Monday, Trump issued formal notices imposing new tariffs on several countries. These include:

• 25% on imports from South Korea, Japan, Malaysia, and Kazakhstan
• 30% on South Africa
• 32% on Indonesia
• 35% on Bangladesh
• 36% on Thailand

These tariffs will apply independently of existing sector-specific tariffs, such as those on autos, steel, and aluminum.

Notably, India and the European Union were left out of this latest round of tariff letters—an omission analysts view as a possible signal of progress in ongoing trade talks with those regions.

Wolfe Research described the announcements as “decidedly mixed news” for markets. While the new tariffs and a recent preliminary agreement with Vietnam could generate up to $54 billion in additional annual revenue for the U.S. government, the looming deadline keeps the threat of renewed trade tensions alive.

Still, some investors remain confident that Trump will act pragmatically to avoid rattling markets—especially in light of past volatility following his “Liberation Day” tariff announcement.

“Nothing has materially changed yet—just letters were sent. But the direction of U.S. trade policy appears increasingly hawkish,” Wolfe analysts wrote in a note to clients.

Amazon Launches Extended Prime Day

Amazon (NASDAQ: AMZN) kicked off its Prime Day sales event on Tuesday, extending it to four days following customer feedback requesting more time to shop.

During the 2024 Prime Day, U.S. consumers spent $14.2 billion, up 11% from the prior year, according to Adobe Analytics data reported by Reuters.

Hershey Names New CEO

Hershey Co. (NYSE: HSY) shares declined after the company announced Kirk Tanner, an executive at Wendy’s, will take over as CEO starting August 18. He replaces longtime leader Michele Buck, who has served over two decades with the company.

SoFi Hits Record on Expansion into Private Markets

SoFi Technologies Inc. (NASDAQ: SOFI) surged to a new all-time high after unveiling plans to offer retail investors access to private companies in sectors including AI, machine learning, and space technology—part of its broader push into alternative investments.

Fed Minutes Awaited

Looking ahead, investor attention turns to the Federal Reserve’s June meeting minutes, due Wednesday. The Fed has held rates steady and signaled caution amid uncertainty over the inflationary effects of Trump’s evolving tariff agenda.

U.S. markets finished sharply higher on Thursday, with the S&P 500 and Nasdaq Composite closing at new record highs, as a stronger-than-expected June jobs report boosted confidence in the economy’s resilience amid ongoing trade tensions and geopolitical shifts.

The Dow Jones Industrial Average surged 344.11 points, or 0.77%, to end at 44,828.53. The S&P 500 rose 0.83% to 6,279.35, while the Nasdaq Composite climbed 1.02% to finish at 20,601.10. Both the S&P and Nasdaq set new all-time closing highs.

The June employment report, released by the Bureau of Labor Statistics, showed the U.S. economy added 147,000 jobs, topping expectations for 110,000. May’s figure was also revised upward to 144,000. In another positive surprise, the unemployment rate fell to 4.1%, bucking forecasts for an increase to 4.3%.

The upbeat data sent Treasury yields higher and led investors to dial back expectations for a near-term Federal Reserve interest rate cut. According to the CME Group’s FedWatch tool, traders now see a 95% chance the Fed will hold rates steady at its next meeting.

“This report pretty much rules out a July rate cut, and raises real doubts about whether we’ll see any cuts this year,” said Jed Ellerbroek, portfolio manager at Argent Capital Management, speaking to CNBC.

The strong report followed a weaker private payrolls figure from ADP on Wednesday, which showed a drop of 33,000 jobs and briefly raised concerns about economic momentum. But Thursday’s government data helped ease those fears.

Investors are also watching for progress on the recently announced U.S.-Vietnam trade deal, as President Donald Trump approaches the early July deadline of his 90-day tariff pause. While markets trading near record highs are vulnerable to pullbacks—especially if trade talks turn sour—Ellerbroek believes the broader sentiment remains constructive.

“There’s no doubt some companies will feel the impact of tariffs, but the market seems ready to weather it,” he added.

Meanwhile, attention remains focused on Trump’s major tax bill, which cleared the Senate on Tuesday and was advanced by the House on Thursday, setting the stage for a final vote.

Thursday marked a shortened trading day, with the New York Stock Exchange and Nasdaq closing at 1 p.m. ET ahead of the Independence Day holiday. U.S. markets will be closed Friday in observance of the holiday.

For the week, all three major indexes finished in the green: the S&P 500 rose 1.7%, the Nasdaq added 1.6%, and the Dow led the way with a 2.3% gain.

The S&P 500 closed at a new all-time high on Wednesday, lifted by a rebound in tech stocks and renewed optimism surrounding international trade agreements. These positive developments helped overshadow weaker-than-expected jobs data showing the first decline in private payrolls in over two years.

At the close (4:00 p.m. ET), the Dow Jones Industrial Average edged down 10 points, or 0.02%. The S&P 500 rose 0.5% to a record 6,226.63, while the tech-heavy NASDAQ Composite gained 0.9%.

Tech Recovery and Trade Momentum Drive Gains

Investor sentiment improved after President Donald Trump announced a new trade deal with Vietnam—the third agreement reached ahead of the July 9 deadline, when a pause on reciprocal tariffs is set to expire. The announcement follows recent progress on deals with China and Canada, and speculation that India may also reach an agreement in the coming days.

Trump stated he has no plans to extend the deadline and will begin formally notifying countries of the tariff rates they will face. According to a Financial Times report, the U.S. is now prioritizing smaller, phased trade agreements in an effort to secure quick victories before the deadline.

Private Sector Jobs Fall for First Time Since 2022

U.S. private payrolls declined by 33,000 in June, falling well short of expectations for a 99,000 increase. It marks the first monthly decline in private employment in over two years. May’s figures were also revised down to 29,000 from an initially reported 37,000—the lowest gain since March 2023.

ADP noted that job losses were concentrated in professional and business services, education, and healthcare. In contrast, modest gains were seen in hospitality, leisure, and manufacturing.

Despite a surprising increase in job openings reported Tuesday, overall hiring slowed, hinting at a potential cooling in the labor market. Investors are now focused on Thursday’s nonfarm payrolls report for further insight into employment trends.

At a central bank conference in Sintra, Portugal, Federal Reserve Chair Jerome Powell reiterated his data-dependent approach to monetary policy. Analysts at Morgan Stanley suggested that further labor market weakness could prompt the Fed to consider interest rate cuts as early as July.

Senate Pushes Forward with Trump’s Economic Plan

In a narrow vote, the Senate passed President Trump’s sweeping fiscal package—referred to as the “One Big Beautiful Bill.” The legislation now moves to the House of Representatives, which aims to approve it by July 4.

The bill, a centerpiece of Trump’s economic agenda, includes extensions of the 2017 tax cuts, new tax relief provisions, and increased spending on defense and border security. However, some Republicans have raised concerns about its long-term impact on the national debt, with nonpartisan estimates projecting it could add over $3 trillion to the federal deficit.

Tesla Rebounds Despite Renewed Trump-Musk Tensions

Tesla (NASDAQ: TSLA) shares bounced back on Wednesday after sharp losses the previous day, following renewed criticism from Trump. The former president accused CEO Elon Musk of taking excessive advantage of federal subsidies and called for a review of Tesla’s government support.

Despite the tension, Tesla reported second-quarter deliveries of 384,122 vehicles—down from 443,956 a year earlier but better than some analysts had feared.

Meanwhile, Microsoft (NASDAQ: MSFT) announced it would lay off up to 9,100 employees, or about 4% of its global workforce, in its largest workforce reduction since 2023. The company said the move is part of an ongoing restructuring strategy to adapt to changing business needs.

U.S. stocks surged midday, with the S&P 500 and Nasdaq reaching record highs, boosted by optimism over trade negotiations and expectations of interest rate cuts. Technology and financial sectors led the rally, supported by positive corporate news, regulatory changes, and strong earnings projections. Investors remain focused on upcoming economic data and the Federal Reserve’s next move.

The Nasdaq has soared 17.5% this quarter, followed by the S&P 500 with a 10.2% gain and the Dow Jones up 4.6%. However, the Dow still lags 2.3% below its December peak as investors assess policy risks and key trade deadlines.

All eyes are on the July 9 deadline for trade agreements. President Trump has floated the idea of adjusting tariffs, while Canada recently withdrew its proposed digital services tax targeting U.S. tech companies to help restart stalled negotiations.

Weaker economic reports have fueled speculation that Trump might replace Fed Chair Jerome Powell with someone more dovish, adding to expectations of early rate cuts. Powell and other Fed officials are scheduled to speak later this week, with markets watching closely for policy signals.

Upcoming data — including non-farm payrolls and ISM manufacturing and services reports — could influence the sustainability of the current rally. Weak numbers may further strengthen the case for rate cuts.

Technology stocks rose 0.69% at midday, driven by continued enthusiasm for AI innovation. Financials followed closely, up 0.7%, after banks passed the Fed’s stress tests. Health care and industrials posted modest gains of 0.27%, while consumer discretionary and real estate underperformed. Real estate fell 0.62% as investors rotated into higher-risk assets.

Juniper Networks jumped 8.3% after the U.S. Department of Justice approved Hewlett Packard Enterprise’s $14 billion acquisition. HPE shares climbed 9.6% on expectations of strong synergies. Oracle also made headlines, gaining 6.4% after forecasting cloud contracts projected to generate more than $30 billion starting in fiscal 2028.

In banking, Bank of America rose 0.8%, while JPMorgan Chase and Wells Fargo advanced 1.5% and 1.9%, respectively, driven by optimism around share buybacks post-stress tests. With both spot and futures markets at record levels, traders are watching the July 9 trade deadline, economic data releases, and Fed commentary to gauge the strength of this bull market.

Dip-buying continues to support stocks for now, but upcoming reports will be key in determining whether bulls can maintain momentum into the new quarter.

Also of note, James Hyerczyk, a seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, continues to offer insights into price movements and chart patterns. He is the author of two books on technical analysis and is well-versed in both futures and equity markets.

The U.S. stock market closed at record highs on Friday, marking a dramatic recovery since early April when fears of a bear market loomed.

The S&P 500 rose 0.5% to end at 6,173.07 — its first all-time high since February 19. The Nasdaq Composite also climbed 0.5%, notching its first record since December 16. The smaller Nasdaq 100, heavily weighted with tech giants, had already set a record earlier in the week.

Friday’s rally nearly stalled late in the session after President Donald Trump announced the suspension of trade talks with Canada over a newly implemented digital services tax. He also signaled a new tariff on Canadian goods would be announced within a week. While that briefly rattled investors, markets regained momentum in the final hour of trading.

The Dow Jones Industrial Average finished the day up 432 points, or 1%. Despite the gain, the index remains about 1,200 points, or 2.7%, below its own record high. Losses from major components like UnitedHealth (down 39% year-to-date), Apple, Merck, and Nike have weighed on the index.

Still, all three major indexes — the Dow, S&P 500, and Nasdaq — posted their biggest weekly gains in six weeks.

A Whirlwind Turnaround

The S&P 500’s path back to record territory has been anything but smooth. From its February 19 high to the April 8 low, the index lost nearly $9.8 trillion in market value. Few expected it to fully recover just 80 days later.

Much of the market volatility was tied to escalating trade tensions. President Trump’s tariff announcements, particularly the April 2 “Liberation Day” proclamation, saw tariffs spike to as much as 50% on dozens of countries. U.S. tariffs on Chinese goods reached over 145% on some products, effectively cutting off trade with the nation.

However, market sentiment began to shift on April 9 when the administration announced a 90-day pause on those tariffs in response to warnings from financial markets. More recently, progress on trade agreements with the U.K. and China has helped restore investor confidence.

“This was a self-inflicted crisis,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “The sell-offs were unnecessary.”

Investor sentiment also improved on Friday after China signaled it would reopen its rare earth exports to the U.S. The announcement followed word from the White House that a trade deal had been reached — a breakthrough after weeks of negotiations.

Despite a 10% across-the-board tariff still in effect, along with sector-specific tariffs — 50% on steel and aluminum, 25% on autos and parts — markets have largely shifted their focus away from trade disputes.

Treasury Secretary Scott Bessent said Friday that the U.S. aims to finalize trade agreements with as many as 10 to 12 key partners by Labor Day. He indicated negotiations are ongoing with 18 countries, though he did not name them.

What’s Fueling the Rally?

Much of the recent surge in stocks has been driven by enthusiasm around artificial intelligence. Explosive demand for Nvidia’s AI chips and efforts by Republicans to deregulate the industry have powered tech stocks higher. Hopes for interest rate cuts from the Federal Reserve, supported by solid economic data and subdued inflation, have also buoyed the markets.

Even after concerns emerged from the House passing Trump’s sweeping tax cut and domestic policy bill, demand for Treasury bonds has remained robust — a sign of ongoing confidence in the U.S. economy.

“Investors get it now,” said Hogan. “You’re going to hear something wild on Air Force One or on Truth Social, but everyone knows to take it with a grain of salt.”

Caution Ahead

While markets are currently riding high, risks remain.

If Congress fails to pass the domestic policy bill — which includes raising the debt ceiling — the U.S. could face a potential debt default. Additionally, if no further trade deals are reached, tariffs could rise again after the current pause expires on July 9.

Geopolitical tensions also linger. A fragile truce between Israel and Iran remains at risk, and existing tariffs may contribute to rising prices, threatening economic growth.

There are subtler threats as well. Stock valuations are now stretched: the S&P 500’s price-to-earnings ratio has surged past 23, indicating that shares are expensive relative to earnings.

Investors celebrated Friday’s milestone, but with challenges on the horizon, the market’s rally may face turbulence in the weeks ahead.

U.S. stocks moved slightly higher on Friday, continuing their recent upward trend, supported by a stable ceasefire between Israel and Iran, signs of easing trade tensions, and new inflation data closely watched by the Federal Reserve.

As of 9:32 a.m. ET, the Dow Jones Industrial Average was up 120 points (0.3%), the S&P 500 rose 15 points (0.3%), and the NASDAQ gained 60 points (0.3%). All three major indexes are on pace to close the week with solid gains.

Cooling Inflation Helps Sentiment

Market optimism was fueled by continued calm in the Middle East and an agreement between the U.S. and China to accelerate the shipment of rare earth materials—vital to a range of industries.

Adding to the positive tone, White House Press Secretary Karoline Leavitt indicated that President Donald Trump may extend the current 90-day pause on reciprocal tariffs, reducing concerns about the administration’s trade policies.

With geopolitical and trade tensions easing, investor attention has shifted back to the U.S. economy and how the Federal Reserve might respond.

In May, the Fed’s preferred inflation measure—the personal consumption expenditures (PCE) price index—rose 0.1% month-over-month, in line with forecasts and April’s reading. Year-over-year, PCE increased 2.3%, slightly above the revised 2.2% gain in April.

The core PCE index, which excludes food and energy prices, rose 0.2% monthly and 2.7% annually—both slightly higher than expected.

“The slightly stronger core PCE is mildly hawkish compared to earlier, softer CPI and PPI data, but overall inflation remains stable,” analysts at Vital Knowledge wrote. “The Fed would likely be cutting rates now if not for ongoing tariff risks.”

The future of interest rate policy remains uncertain as the Fed continues to evaluate how inflation and trade policy are interacting. For now, the central bank is taking a wait-and-see approach.

Meanwhile, U.S. GDP contracted by 0.5% on an annualized basis in the first quarter—the economy’s first decline since 2022.

Nike Shares Jump After Strong Earnings

Nike (NYSE: NKE) stock rallied after the company reported fiscal Q4 results that beat Wall Street expectations. Executives said the financial drag from its restructuring efforts may have reached a low point.

The company also announced plans to shift more of its manufacturing out of China and into the U.S. to reduce potential tariff-related costs.

Bank Stocks in Focus as Fed Releases Stress Test Results

The banking sector is also in the spotlight, with the Federal Reserve set to publish results of its annual stress tests later today. Analysts expect that most major banks will pass, demonstrating sufficient capital to weather a major downturn. This year’s test is expected to be less severe than in past years.

Oil Prices Slide Despite Friday Rebound

Crude oil prices rose slightly on Friday, but both Brent and WTI remain on track for their biggest weekly losses in over two years. The Israel-Iran ceasefire has reduced geopolitical risk, which had previously propped up oil prices.

As of 9:32 a.m. ET, Brent crude was up 0.6% to $67.10 per barrel, while West Texas Intermediate (WTI) rose 1% to $65.91 per barrel. Both benchmarks are headed for weekly declines of around 12%—the steepest drop since March 2023.