U.S. stock markets finished the week at new highs, buoyed by strong employment data and reduced trade tensions.

In June, the U.S. economy added 147,000 jobs, surpassing expectations of 118,000, while the unemployment rate fell to 4.1%, contrary to predictions of an increase.

The positive employment figures sparked a rally on July 2, maintaining momentum into the July 4th holiday.

As earnings season approaches in mid-July, analysts suggest a cautious yet optimistic outlook for the second half of 2025, particularly with Federal Reserve guidance on inflation and interest rates forthcoming.

Jeffrey Roach, Chief Economist at LPL Financial, remarked that this robust payroll growth allows the Federal Reserve to take a cautious stance at its upcoming policy meeting.

The S&P 500 rose by 51.93 points (0.8%) to 6,279.35, and the Dow Jones gained 344.11 points (0.7%) to reach 44,828.53, with the Dow seeing the largest gain at 2.3%.

Tech stocks, particularly Nvidia and Broadcom in the AI and semiconductor sectors, remained popular, stabilizing the market amid a shift towards value and small-cap stocks.

Other sectors, including banking, retail, and airlines, experienced notable gains, while housing stocks faced a decline.

The Nasdaq-100 rose by 1.7%, driven by strong performance in tech stocks, contributing to the overall market rally.

Despite the bullish market sentiment, investors remain cautious due to upcoming tariff decisions due on July 9, which could introduce volatility.

Relief came from global trade developments, including a temporary easing of U.S. tariffs on some Asian imports, alleviating geopolitical concerns.

Treasury yields increased slightly following the jobs report, briefly strengthening the U.S. dollar and indicating improved economic confidence.