U.S. Markets Rally for Second Month as Trade Hopes Rise but Tariff Risks Loom

The U.S. stock market extended its upward momentum on Monday, capping off a second consecutive winning month. The S&P 500 climbed 0.5%, continuing its sharp rebound from a 20% drop earlier in the spring. Similarly, the Dow Jones Industrial Average added 275 points (0.6%), while the Nasdaq composite also rose by 0.5%. This rally marked a significant milestone, showcasing renewed investor confidence amid easing trade tensions and positive economic signals.

Trade Optimism Boosts Markets, But Analysts Warn of Potential Tariff Escalation Risks

A major driver of the gains was news from Canada, which reversed plans to tax U.S. technology firms and resumed trade discussions with the United States. This development came after President Trump had previously suspended talks in protest. The market has been sensitive to international trade issues, with optimism building around potential deals that could soften the impact of tariffs. These hopes have fueled much of the stock market’s recovery, which had been threatened by escalating trade wars.

Despite the positive momentum, analysts caution that record stock levels could reignite tariff tensions. Deutsche Bank strategists noted that previous market rallies in 2018 and 2019 were followed by increased tariff threats, which in turn led to pullbacks. This cycle could repeat, especially as several paused tariffs are scheduled to resume soon. Still, strategists believe that if tariffs start significantly affecting growth or inflation, policymakers may ease them once again to stabilize markets.

Corporate Gains and Economic Signals Shape Market Outlook Amid Ongoing Trade Uncertainty

Strong performances from several companies also helped lift the indexes. Oracle jumped 4% after announcing a strong start to its fiscal year, bolstered by large cloud deals. GMS surged 11.7% after agreeing to be acquired by a Home Depot subsidiary, outpacing a rival bid from QXO.

Meanwhile, Hewlett Packard Enterprise and Juniper Networks both saw double-digit gains after reaching a merger-related agreement with the U.S. Department of Justice. Bank stocks also climbed following a Fed assessment confirming their financial resilience.

Looking ahead, investors are focused on Thursday’s jobs report, which is expected to show a decline in hiring—potentially reinforcing the Federal Reserve’s cautious stance on interest rates. The Fed has kept rates unchanged in 2025, awaiting more clarity on how trade and inflation trends unfold.

President Trump continues to push for rate cuts, and his appointees have signaled openness to reductions soon. Meanwhile, bond yields fell slightly, with the 10-year Treasury dropping to 4.23%. Global markets were mixed, reflecting continued uncertainty over trade and manufacturing trends.