The S&P 500 (^GSPC) is back at an all-time high for the first time since February as optimism around Federal Reserve interest rate cuts and fading fears of tariffs have driven stocks higher.

In the final full trading week of June, the S&P 500 rose 3.5%, while the Nasdaq Composite (^IXIC) rose more than 4.1%. Both indexes ended the week at all-time highs. Meanwhile, the Dow Jones Industrial Average (^DJI) added about 3.8%.

The June jobs report will headline the first week of July. Fresh readings on job openings and wage data, as well as manufacturing and services activity, will also be in focus for investors.

Investors will also have a close eye on any updates regarding President Trump’s various tariff pauses ahead of the administration’s self-imposed tariff delay deadline on July 9.

Markets will close at 1 p.m. on Thursday and remain shut on Friday for the Fourth of July.

A potential summer cut

Markets are increasingly optimistic that the Federal Reserve may cut interest rates soon. As of Friday, markets were pricing in an 18.6% chance the central bank cuts interest rates at its next meeting in late July, up from a 14.5% chance seen last week, per the CME FedWatch Tool. Meanwhile, probability investors are placing on a cut by the end of September has surged, with markets now pricing in a 93% chance the central bank will have lowered rates by then, up from a 70% chance seen just a week ago.

The shift comes as several Fed officials have alluded to the possibility of cutting interest rates as soon as the central bank’s July meeting.

In a speech on June 23, Federal Reserve governor Michelle Bowman noted that although the labor market is showing signs of strength, it “appears to be less dynamic.”

“With inflation on a sustained trajectory toward 2%, softness in aggregate demand, and signs of fragility in the labor market, I think that we should put more weight on downside risks to our employment mandate going forward,” Bowman said.

However, Fed Chair Jerome Powell has been more cautious about interest rate cuts. While testifying in front of House lawmakers last week, Powell stressed that the central bank is “well-positioned to wait” before moving interest rates.

EY chief economist Greg Daco told Yahoo Finance he believes the Fed will likely cut in September.

“By then we will have seen more demand erosion, we will have seen a labor market that unfortunately has slowed and income growth as a result has slowed, leading to slower consumer spending activity,” Daco said.