Optimism surges on Middle East, rate cuts, trade deals boosts S&P 500
US markets closed higher Thursday, with gains for the S&P 500, Nasdaq, and Dow Jones all ending the session with gains.
For the S&P 500 a 0.8% rise to 6,141.02 took the index to within a few points of a record intraday high (currently February’s 6,147.43). The Nasdaq was up 0.97% at 20,167.91, again close to a record high, and the Dow Jones was up 0.94% (404.41 points) to 43,386.84. The S&P/TSX Composite Index closed 0.7% or 185.63 points higher at 26,751.95.
The US market has been on quite the journey, having lost almost $10 trillion following the ‘Liberation Day’ tariff announcements in April. The current buoyancy could see a continued rally with new highs to come, especially if Trump’s tax bill and/or Middle East tensions head in the right direction.
“Meaningful progress on any of the two matters can bolster equities to fresh records,” said José Torres, senior economist at Interactive Brokers.
However, there are headwinds, not least the scale of the impact that tariffs have had on US inflation.
Multiple factors fueled investor sentiment Thursday including trade with the White House’s Karoline Leavitt saying that the July 8 tariff deadline for an end to the 90-day pause is “not critical” but adding it’s the president’s decision.
There is further optimism on trade with US Commerce Secretary Howard Lutnick saying that deals are imminent with 10 trading partners. He said that a deal on rare earths has already been signed with China. Agreement with India will be “very big” according to President Trump who was speaking at an event in Washington.
On the Middle East, investors and analysts are weighing the current ceasefire and if it could lead to a lasting end to the Israel-Iran conflict. The truce appears to holding for now and oil prices have tumbled following escalation in the early days of the tensions.
Mixed economic data has renewed calls for rate cuts by the Fed this year and boosting bonds. While recurring unemployment benefit claims reached a record high in the week ended June 12 (1.97 million) there was a slower pace of new claims (236,000). Consumer spending was softer too, rising by the smallest amount in the first quarter of 2025 since early in the pandemic.
Chris Larkin at E*Trade from Morgan Stanley noted that the economy is slowing but remains resilient.
“While the numbers as a whole don’t necessarily make a compelling case for bulls or bears, for the time being, the market appears fixated on tech strength and the S&P 500’s potential return to record levels,” he said.
Friday’s session appears set to continue the optimism, with Asian and European markets trading higher and US futures also higher.
