Stocks climbed higher Thursday as the S&P 500 Index (NYSE: SPY) continues to trade within reach of its all-time high as market participants bet interest rate cuts could come as soon as July.
The broader market index rose 0.8% to settle at 6,141.02, and now sits less than 1% below its intraday record high of 6,147.43 reach back in February and it's all-time closing high of 6,144.15. The S&P has seen explosive gains since the initial shock of President Donald Trump's tariffs announced in April began to ease as economic data continues to show minimal impacts.
The Dow Jones Industrial Average (NYSE: DIA) also rose over 400 points on Thursday, while the tech-heavy Nasdaq Composite (NASDAQ: QQQ) advanced nearly 1%.
Deutsche Bank Macro Strategist Henry Allen wrote in a Thursday note to clients that the next market moves will be driven by the fate of President Donald Trump's One Big Beautiful Bill Act in Congress in the near-term, before investors turn their attention back to tariffs.
"With markets holding steady, we're now at a point where the focus is turning to several important catalysts over the next two to three weeks," Allen wrote. "The first is the U.S. tax bill, which is currently working its way through the Senate, and the administration is trying to get it passed by Independence Day on July 4."
Allen noted that attention will "swiftly turn back to tariffs" after the tax bill is passed, "as the 90-day extension to the reciprocal tariffs ends in less than two weeks' time on July 9."
"As it stands, it's still unclear what will happen at that point, although several countries remain in negotiations with the U.S."
Federal Reserve Bank of Richmond President Thomas Barkin said Thursday that Trump's tariff could increase inflation over the coming month, but does not expect their impact to be "anywhere near as significant" as the price increases seen during the pandemic.
"I do believe we will see pressure on prices," Barkin said in the prepared remarks for the New York Association for Business Economics, adding that "to date, these increases have had only modest effects on measured inflation, but I anticipated more pressure is coming," as businesses expect to pass some of the costs onto consumers. Barkin noted that consumers have indicated they plan to limit their purchase of high-tariff goods.
The central bank left their overnight funds rate unchanged between 4.25% to 4.5% last week as economic uncertainties continue to weigh on policymakers' outlooks. However, a few Federal Open Market Committee members have said they are ready to back an interest rate cut at their next meeting in July if prices remain stable.
Investors are currently pricing in a more than 75% chance the Fed will hold rates at its July 30 decision, according to CME Group's FedWatch Tool.
Geopolitical tensions that clouded over Wall Street for several sessions also eased over the last few days, as the ceasefire between Israel and Iran appears to be holding up. Trump said Wednesday that his administration plans to meet with representatives from Tehran next week, offering another sign that a trade deal may be reached in the near-term.
Looking ahead, market participants will focus on key inflation and consumer sentiment readings on Friday, as well as earnings reports from companies including Nike (NYSE: NKE).