Stock market today: S&P 500, Nasdaq pull back from record-setting rally after Trump ends Canada talks

US equities, including the S&P 500 and Nasdaq, closed at fresh all-time highs on Friday, primarily driven by optimism surrounding a confirmed US-China trade truce, which includes China's commitment to rare earth minerals, and persistent expectations for a Federal Reserve rate cut. This record close occurred despite a temporary late-session dip following President Trump's announcement of terminating trade talks with Canada over a digital services tax and threatening new tariffs. The market's resilience indicates the positive impact of the US-China trade developments and rate cut hopes outweighed specific trade tensions, while mixed inflation data and signs of economic slowdown continued to frame the Fed's policy debate.

Analysis

US equity markets demonstrated significant resilience, with the S&P 500 and Nasdaq Composite closing at all-time highs and the Dow Jones Industrial Average gaining 1%, or approximately 400 points. The primary catalyst for this upward momentum was the formalization of a trade truce between the US and China, which has been 'signed' and 'cemented.' A key component of this pact is China's commitment to deliver rare earth minerals, a development confirmed by Commerce Secretary Howard Lutnick, who indicated US countermeasures would be subsequently removed. This progress on the China front, combined with persistent market hopes for a Federal Reserve rate cut, overshadowed a late-session disruption caused by President Trump's announcement of terminating trade discussions with Canada over a digital services tax and threatening new tariffs. The Fed's path remains a point of contention; while its preferred inflation gauge for May showed acceleration above the 2% target—a factor Fed Chair Powell noted could be a 'stumbling block' for a rate cut—the same report also contained signs of an economic slowdown, complicating the policy debate between hawks and doves.

Key Decisions for Investors

• The confirmed US-China trade truce significantly de-risks a major source of market uncertainty, supporting a constructive stance on US equities, though sector-specific impacts of the deal's details warrant further scrutiny.
• Investors should closely monitor the escalating US-Canada trade dispute, as new tariffs could introduce fresh volatility and negatively affect companies with significant cross-border supply chains.
• The conflicting signals from inflation data and signs of economic slowdown make the Federal Reserve's next policy decision highly data-dependent, meaning upcoming economic releases are critical to watch for indications of a potential rate cut or hold.