U.S. Stock Market Hits Record High as Recovery Accelerates

Traders on the New York Stock Exchange floor

U.S. stocks closed at record levels on Friday, marking another significant milestone in the market’s rapid rebound from a steep decline earlier this year. That drop was driven by worries that the Trump administration’s trade policies might damage the economy.

The S&P 500 climbed 0.5%, ending above its previous high from February. Between February 19 and April 8, the index had fallen nearly 20%, but the recovery to new highs happened in roughly half the time it usually takes, according to Sam Stovall, chief investment strategist at CFRA.

“Investors can finally breathe a little easier,” Stovall commented.

The Nasdaq composite also rose 0.5% to set its own new record, while the Dow Jones Industrial Average advanced 1%.

S&P 500 chart from AP News and Factset, showing the v-shape recovery

Markets wavered briefly after President Donald Trump announced on Friday that he would stop trade negotiations with Canada, a move that threatened to derail Wall Street’s run to new highs. The S&P 500 briefly dipped into negative territory but quickly rebounded.

Friday’s rally was broad-based, with almost every sector of the S&P 500 posting gains. Nike delivered the biggest individual jump, soaring 15.2% despite cautioning that tariffs would significantly impact its bottom line.

Investors also appeared to set aside concerns that conflict between Israel and Iran might disrupt global oil supplies and drive prices higher. A ceasefire remains in place between the two countries. U.S. crude prices edged up 0.4% to $65.52 per barrel but remain at levels seen before the conflict flared.

Trade developments between the U.S. and China also drew investor attention. U.S. Treasury Secretary Scott Bessent announced Friday that the two nations signed a trade agreement easing access for American companies to secure vital rare earth minerals and magnets from China, materials essential for manufacturing and microchip production.

President Trump during a press conference

China’s Commerce Ministry confirmed that negotiators had finalized the framework of their trade discussions. However, its statement did not explicitly promise guaranteed U.S. access to rare earth exports, instead saying China would review and approve qualified export applications for restricted items.

Meanwhile, new inflation data released Friday showed consumer prices edged higher in May, broadly in line with economists’ forecasts. Still, inflation remains a major worry for both businesses and households. Trump’s unpredictable tariff moves have made financial planning harder for companies and added to consumer anxiety over stubbornly high inflation. Many companies, from automakers to retailers, have warned that higher import duties will likely cut into sales and profits.

The U.S. currently maintains a 10% base tariff on all imported goods, with even steeper rates for products from China, steel, and autos. While the economy and consumer spending have held up relatively well so far, analysts expect these tariffs will increasingly filter through to higher prices for consumers.

“We might have expected to see more of this show up in the inflation numbers already,” said Greg Wilensky, head of U.S. fixed income at Janus Henderson. “But we still anticipate these impacts will become more pronounced over the next few months.”

The possibility of even steeper tariffs still looms over the outlook. A pause on planned retaliatory tariffs targeting numerous countries is set to expire in July. Failure to extend that pause or secure new deals could once again rattle businesses, investors, and consumers.

Wall Street sign in New York

The Federal Reserve is keeping a close eye on the tariff situation, especially given its implications for inflation. The central bank’s preferred inflation gauge, the personal consumption expenditures (PCE) index, rose to 2.3% in May, slightly higher than the 2.2% rate in April, and remaining above the Fed’s 2% target.

The Fed cut interest rates three times in late 2024 after previously delivering aggressive hikes aimed at reining in soaring inflation. At its peak, the PCE index had climbed to 7.2% in 2022, while the more widely watched consumer price index hit 9.1%.

So far in 2025, the Fed has not cut rates again, wary that tariff tensions could reignite inflation and slow the economy. However, many economists still predict at least two rate cuts before year-end.

Bond yields were little changed Friday. The yield on the 10-year Treasury rose to 4.27% from 4.24% the previous day, while the 2-year yield, which more closely reflects Fed policy expectations, inched up to 3.74%.

By the close of trading Friday, the S&P 500 was up 32.05 points to 6,173.07. The Dow gained 432.43 points, finishing at 43,819.27. The Nasdaq advanced 105.55 points to 20,273.46.

European stock markets were mostly higher, while Asian markets ended mixed.