Wall Street continues its impressive streak as the US stock market rally pushes major indexes to fresh record highs. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all added to their gains on Monday, driven by renewed trade optimism and strong economic data. This marks the second straight winning month for the U.S. stock market, following a remarkable rebound from the spring 2025 sell-off.
Stock Market Bounce Back From Spring Sell-Off
After dipping nearly 20% earlier this year, the S&P 500 has now climbed back and closed at a new all-time high of 6,173.07. On Monday, it rose another 0.3%. The Dow Jones Industrial Average (INDEXDJX:.DJI) jumped 209 points, or 0.5%, while the Nasdaq Composite (NASDAQ:.IXIC) gained 0.5% to finish at 20,273.46, also a record.
The broad nature of the gains — with nearly every sector in the green — is fueling investor confidence. Retail giant Nike Inc. (NYSE:NKE) surged 15.2% on Friday, defying tariff fears, to lead the S&P 500.
Global Markets React to Trade Developments
Markets around the world are reacting to improving trade relations. Canada’s recent decision to resume trade talks with the U.S. after scrapping a controversial tax on American tech firms gave investors a confidence boost. U.S. futures rose early Monday on news of the resumed discussions, with S&P 500 futures up 0.4% and Dow futures up 0.5%.
In Asia, Japan’s Nikkei 225 jumped 0.8%, and China’s Shanghai Composite rose 0.6% as factory activity showed slight improvement. European indexes were mixed, with Germany’s DAX and France’s CAC 40 down 0.2%, and Britain’s FTSE 100 losing 0.3%.
Inflation and Tariff Risks Still Loom
Despite the strength of the US stock market rally, concerns remain. Inflation ticked up slightly in May, with the Federal Reserve’s preferred measure, the personal consumption expenditures (PCE) index, rising to 2.3%, just above its 2% target.
President Trump’s unpredictable tariff policy remains a major risk. Though a new round of tariffs has been postponed until July 9, failure to reach trade deals could lead to a fresh wave of import taxes, especially on goods from China, steel, autos, and more. Trump warned that letters would soon be sent to trading partners notifying them of impending penalties unless agreements are reached.
These trade uncertainties make it harder for companies to forecast earnings and could squeeze household budgets if prices rise further.
What Is the Fed Watching Now?
The Federal Reserve is closely monitoring both inflation and trade tensions. It slashed interest rates three times in late 2024 to offset the effects of previous hikes aimed at taming inflation, which peaked in 2022 with the PCE at 7.2% and CPI at 9.1%.
Now, the Fed is walking a tightrope — trying to avoid triggering a recession with premature rate hikes while preparing to cut rates if tariffs push inflation higher again. Most economists anticipate at least two rate cuts before the end of 2025.
Bond markets appear stable for now. The 10-year Treasury yield ticked down to 4.26%, while the 2-year yield, more tied to Fed policy expectations, remained near 3.73%.
Oil Prices and Currency Movements
Crude oil prices slipped slightly on Monday. U.S. benchmark crude fell to $65.37 per barrel, while Brent crude edged down to $66.62.
On the currency front, the U.S. dollar lost ground against major rivals. It fell to 144.26 Japanese yen from 144.46, while the euro slipped to $1.1721 from $1.1725.
Bottom Line for Investors
The US stock market rally shows resilience despite global uncertainties. Strong earnings, easing trade tensions, and stable bond yields are fueling momentum — but inflation and tariffs remain key risks.
Investors should stay cautious but optimistic about the US stock market. Broad sector participation and steady fundamentals point to potential continued upside — especially if the Fed cuts rates and trade agreements hold.
Featured Image – Freepik
