Zacks Equity Research
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Wall Street closed higher on Friday, driven by manufacturing and discretionary stocks. Markets were boosted by the optimism that the United States was on the verge of striking a trade deal with the European Union. All three benchmark indexes closed in the green.
The Dow Jones Industrial Average (DJI) rose 0.5%, or 208.01 points, to close at 44,901.92. Eighteen components of the 30-stock index ended in positive territory, 11 ended in negative, while one remained unchanged.
The tech-heavy Nasdaq Composite gained 50.36 points, or 0.2%, to close at 21,108.32.
The S&P 500 added 25.29 points, or 0.4%, to close at 6,388.64. Eight of the 11 broad sectors of the benchmark index closed in the green. The Materials Select Sector SPDR (XLB), the Industrials Select Sector SPDR (XLI) and the Consumer Discretionary Select Sector SPDR (XLY) advanced 1.2%, 1% and 0.9%, respectively, while the Communication Services Select Sector SPDR (XLC) lost 0.9%.
The fear gauge CBOE Volatility Index (VIX) decreased 3% to 14.93. A total of 17.7 billion shares were traded on Friday, lower than the last 20-session average of 18.1 billion. Advancers outnumbered decliners by a 2-to-1 ratio within the S&P 500.
On Friday, the stock markets surged to record highs, fueled by growing optimism over potential trade agreements. Investors responded positively to signs of progress in U.S. trade negotiations with key partners, particularly Japan and the European Union. The U.S.-Japan agreement, already in motion, set a favorable tone, and expectations arose that the United States and EU could soon finalize a similar deal to prevent tariff hikes scheduled for Aug. 1. European Commission President Ursula von der Leyen was set to meet President Trump in Scotland over the weekend. This easing of trade tensions removed a key source of policy uncertainty that had been weighing on investor sentiment, prompting a wave of risk-on behavior across the markets.
The positive momentum was further reinforced by strong corporate earnings, with roughly 85% of S&P 500 companies reporting results that exceeded analyst expectations. This earnings strength, combined with reduced trade anxiety, boosted investor confidence globally. Sectors sensitive to trade policy, including industrials and consumer discretionary, saw notable gains as investors priced in the likelihood of a more stable international trade environment. The optimism also lifted commodity markets, while safe-haven assets like gold saw modest declines. Overall, the market rally on July 25 reflected investor confidence that trade tensions were easing and that the economic outlook remained resilient heading into the second half of the year.
