S&P 500, Nasdaq hit record closing highs amid trade negotiations, rate cut bets

NEW YORK: Wall Street extended its rally on Friday, sending S&P 500 and Nasdaq to all-time closing highs as trade deal hopes fueled investor risk appetite and economic data helped solidify expectations for rate cuts from the U.S. Federal Reserve.

Stocks pared gains after U.S. President Donald Trump terminated trade negotiations with Canada in response to its digital tax on technology companies.

Even so, all three major U.S. stock indexes posted weekly gains. Upon reaching its record closing high, the tech-heavy Nasdaq confirmed it entered a bull market when it touched its post "liberation day" trough on April 8.

The blue-chip Dow remained 2.7% below its record closing high reached on December 4.

"This market's been pretty resilient," said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana. "Investors are riding momentum and looking for breakouts."

"They don't want to get caught on the wrong side of this thing," Carlson added. "Many investors already have missed out. And now you have the S&P flirting with an all-time high."

The Personal Consumption Expenditures report from the Commerce Department showed consumer income and spending unexpectedly contracted in May. And while tariffs have yet to affect price growth, inflation continues to hover above the Fed's 2% annual inflation target.

A separate report from the University of Michigan confirmed consumer sentiment has improved this month, but remains well below December's post-election bounce.

Financial markets have priced in a 76% likelihood that the Fed will implement its first rate cut of the year in September, with a smaller, 19% probability of a rate cut coming as soon as July, according to CME's FedWatch tool.

Washington and Beijing reached an agreement to expedite rare-earth shipments from China to the U.S., a White House official said, well ahead of the July 9 expiration of the 90-day postponement of U.S. President Donald Trump's "reciprocal" tariffs.

Additionally, U.S. Treasury Secretary Scott Bessent said the administration's trade deals with 18 of the main U.S. trading partners could be done by the September 1 Labor Day holiday.

The Dow Jones Industrial Average rose 432.43 points, or 1.00%, to 43,819.27, the S&P 500 gained 32.05 points, or 0.52%, to 6,173.07 and the Nasdaq Composite gained 105.55 points, or 0.52%, to 20,273.46.

Among the 11 major sectors of the S&P 500, consumer discretionary enjoyed the biggest percentage gain, while energy shares were the laggards. Chipmaker Micron's MU.O upbeat forecast revived investor confidence in artificial intelligence-related stocks, while Nvidia NVDA.O rose 1.8%, edging closer to $4 trillion market capitalization after reclaiming its position as the world's most valuable company.

Nike's shares NKE.N jumped 15.2% after forecasting a smaller-than-expected drop in first-quarter revenue. Advancing issues outnumbered decliners by a 1.29-to-1 ratio on the NYSE.

There were 347 new highs and 55 new lows on the NYSE. On the Nasdaq, 2,111 stocks rose and 2,342 fell as declining issues outnumbered advancers by a 1.11-to-1 ratio.

The S&P 500 posted 35 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 101 new highs and 68 new lows.

Volume on U.S. exchanges was 22.07 billion shares, compared with the 18.27 billion average for the full session over the last 20 trading days.