Jobs data, trade and fiscal policies in focus with S&P 500 on cusp of record

Investors who have been captivated by recent geopolitical events are poised to shift their attention in the coming week to key economic data and looming policy deadlines to see if the torrid rally in U.S. stocks extends higher.

The tech-heavy Nasdaq 100 tallied a record high this week while the benchmark S&P 500 moved to the cusp of an all-time peak. Easing tensions in the Middle East paved the way for the latest bump higher in stocks, as a conflict between Israel and Iran appeared to calm after missile strikes between the two nations had set the world on edge.

Focus will shift to Washington in the coming week. President Donald Trump wants his fellow Republicans to pass a sweeping tax-cut and spending bill by July 4, while developments between the United States and trading partners are poised to capture headlines with Trump's "Liberation Day" tariffs set to take effect the following week.

Investors also get a crucial view into the U.S. economy with the monthly employment report due on Thursday. U.S. stock markets are closed on Friday, July 4, for the U.S. Independence Day holiday.

Citigroup's U.S. economic surprise index has been weakening, indicating that data has been missing Wall Street expectations, said Matthew Miskin, co-chief investment strategist at Manulife John Hancock Investments.

"After some softer May data, the June data is really going to be under a microscope," Miskin said. "If the data deteriorates more, it may get the market's attention."

U.S. employment is expected to have climbed by 129,000 jobs in June, according to a Reuters poll -- a modest slowdown from May's 139,000 increase.

Data on Thursday showed the number of Americans filing new applications for jobless benefits fell in the prior week, but the unemployment rate could rise in June as more laid off people struggle to find work.

"The labor market right now is front and center over the next few weeks," said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management.

Employment data could factor into expectations for when the Federal Reserve will next cut interest rates, with investors also watching to see if inflation is calming enough to allow for lower rates. Fed Chair Jerome Powell has been wary that higher tariffs could begin raising inflation, a view he told the U.S. Congress this week, although some Fed officials have talked about a stronger case for cuts and Fed fund futures trading in the past week indicated ramped-up bets for more easing this year.

The level of tariffs will come into sharper view with a July 9 deadline for higher levies on a broad set of countries. Stocks have rebounded sharply since plunging in April following Trump's "Liberation Day" tariff announcement, as the president pulled back on some of the most severe tariffs and fears about a recession eased, but markets could remain sensitive to any developments.

Investors also will focus on the U.S. fiscal bill in Congress for indication of the extent of stimulus in the legislation and how much it could widen federal deficits.

With a roller-coaster first half nearly complete, the S&P 500 is up more than 4% so far in 2025. Recent history has shown July has been a strong month for stocks, with the S&P 500 increasing 2.9% in July on average over the past 15 years, Wedbush analysts noted in a report this week.

Also around the corner is the kick-off of second-quarter U.S. corporate earnings season in the coming weeks, with concerns over how much tariffs may be biting into company profits or affecting consumer spending. S&P 500 earnings are expected to have climbed 5.7% in the second quarter from a year earlier, according to LSEG IBES data.

"We've been in a geopolitically focused market over the past several weeks," said Josh Jamner, senior investment strategy analyst at ClearBridge Investments. "I think the dawn of earnings season ... will refocus the market back towards fundamentals."