The S&P 500 reached a new record closing high on Friday, marking its first such achievement in four months. After just missing intraday and closing records the previous day, the index rose to 6,187.68, its highest point since February.
Major indexes at the 4 p.m. ET closing bell on Friday:
Here are four key factors that contributed to the recent rally and record highs.
1. US-China Trade Deal
The US and China finalized a framework agreement that allows China to approve exports of rare earth minerals while the US eases some restrictions on high-tech exports to China. President Trump announced the signing of this deal during an event at the White House, which was later confirmed by China’s Commerce Ministry.
This agreement has boosted investor confidence, especially as uncertainty over US-China trade relations has been high since Trump threatened significant tariffs on Chinese goods in April. Furthermore, Commerce Secretary Howard Lutnick indicated that the US is working on ten additional trade agreements, which are expected to be finalized soon.
2. Israel-Iran Conflict Eases
Markets reacted positively this week after Trump announced a ceasefire between Israel and Iran, alleviating fears that escalating tensions in the Middle East could disrupt oil supplies and impact the global economy. Although conflicts persisted, the announcement calmed investor concerns, particularly regarding potential oil supply disruptions.
Oil prices have also decreased from their earlier peaks this month, with Brent crude trading around $67 a barrel, down 14%, and West Texas Intermediate crude close to $65 a barrel, a 12% decrease from highs during the conflict.
3. Dovish Fedspeak and Economic Data Boost Rate-Cut Expectations
Investor sentiment grew more optimistic regarding potential interest rate cuts, spurred by new economic data and encouraging comments from Federal Reserve officials. Consumer spending fell by 0.1% in May, the first drop this year, while PCE inflation rose by 0.1% to an annualized rate of 2.3%, aligning with economists’ forecasts.
Investors are now estimating a 27% chance that the Fed will cut rates by a quarter-point in July, a notable increase from 12.5% the week prior. Additionally, Fed Chair Powell has indicated a cautious approach to loosening monetary policy, yet some Fed officials have suggested that a July cut may be warranted.
4. Ongoing Optimism Surrounding AI
The AI sector continues to thrive, further propelling stock prices. The Nasdaq 100 reached a new record this week, and Nvidia hit new all-time highs, gaining 64% since its March lows. Analysts are optimistic about the tech sector, particularly semiconductors.
Despite the positive momentum, uncertainties persist regarding the sustainability of the Israel-Iran ceasefire and the potential impacts of tariffs. Experts caution about the need to strategize and invest wisely, as markets are still grappling with high valuations.
