Trump Tariffs and Inflation Could Rain on Stock Markets’ Summer Surge. Here’s Why and 5 More Things to Know Today.

The Beach Boys, led by the late, great Brian Wilson, liked to sing about good vibrations. That’s certainly what investors are feeling as the second quarter ends and the summer heats up.

The S&P 500 and Nasdaq both finished last week at record highs, erasing the big drops that followed sweeping U.S. tariffs in April. The question is whether these vibes are as good as they get—or if there’s room for stocks to climb even higher.

On trade, things are looking up. Talks with Canada are back on track after the U.S.’s biggest export market rescinded a digital services tax that would have hit Amazon, Google-parent Alphabet, and Facebook-owner Meta Platforms. The July 9 deadline for new trade deals may not be that firm, the White House said last week.

President Donald Trump’s signature budget bill is making its way through the Senate, and the tax cuts it contains could provide a boost for corporate earnings—but not for solar energy, which hasn’t been invited to the party. The economy isn’t doing too badly. The June jobs report, out Thursday this week instead of Friday because of the July 4 holiday, is expected to show companies are still hiring.

And there is some hope of a Federal Reserve interest-rate cut as soon as the July 30 decision. Chair Jerome Powell will speak on a panel in Sintra, Portugal on Tuesday.

But it’s not all sunshine ahead. While the impact of tariffs has yet to make a big dent on corporate earnings, that may well change in the second half. A good test will be earnings from Constellation Brands Tuesday. Its Modelo brand is the best-selling beer in the U.S. overtaking Bud Light. It’s made in Mexico, and the brewer’s stock was one of the first to be hit by trade fears, so its outlook will be a good sign of what lays ahead in the new quarter.

After the chaos of the first half of the year, there are reasons to believe stocks can enjoy a smoother ride over the rest of 2025.

Wouldn’t it be nice.

—Brian Swint

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Senate Debates Spending Megabill As Deadline Looms

The Senate was debating the megabill after narrowly advancing it, though Democrats have cried foul about the GOP’s use of an accounting tactic to ram the bill through on a simple majority vote. Democrats delayed a vote by forcing the 940-page bill read aloud, but lawmakers could wrap it up today.

• The nonpartisan Congressional Budget Office estimated 11.8 million more people will lose health insurance by 2034 and that the current Senate bill would raise deficits by $3.3 trillion. Republicans argue the extension of the 2017 tax cuts in the current bill doesn’t affect the federal budget.
• Republicans hope to push the bill through while avoiding the 60-vote filibuster rule. Democrats are calling their tax cut accounting “fake math” and a “gimmick” to mask the true cost of the bill. Lawmakers are rushing to get something to President Donald Trump’s desk by Friday.
• North Carolina Republican Sen. Thom Tillis joined Kentucky Sen. Rand Paul in opposing advancing the bill to debate, but Tillis was the one who caught heat from Trump, who threatened him with a primary challenger. Tillis said Sunday he wouldn’t seek reelection, something Trump celebrated on social media.
• The Senate bill would end credits for large-scale wind and solar projects that aren’t operational by 2027, plus end credits for electric vehicles and residential solar panels, and impose a new tax on projects containing Chinese components. Tesla CEO Elon Musk called it “Utterly insane and destructive.”

What’s Next: Connecticut Democrat Sen. Chris Murphy told NBC News that there’s a chance that the megabill won’t pass. Some Republicans are unhappy with the bill’s budgetary effects. The House Freedom Caucus says the Senate version adds $1.3 trillion to the deficit, $651 billion more than an agreed budget framework.

— Liz Moyer, Janet H. Cho, and Avi Salzman

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Jobs Data Coming This Week As Market Watches Fed

Economic data this week could help Federal Reserve officials decide their next interest rate move—whether to push for another cut sooner rather than later. Much could depend on the only jobs report left before the Fed’s July meeting. That report comes out Thursday during a holiday-shortened trading week.

• Jobs growth has cooled this year, but the labor market is still solid, Fed Chairman Jerome Powell has said. But a particularly weak jobs report could tilt the balance of risks to the employment side of the Fed’s dual mandate.
• The Institute for Supply Management’s Purchasing Managers’ Index, due out on Tuesday, is expected to show a reading of 48.8. That would be roughly even with the May reading. On Thursday, its services PMI for June is expected to read 50.5, slightly higher than May.
• Tuesday’s Job Openings and Labor Turnover Survey is expected to show that there were 7.3 million job openings on the last business day of May, nearly 100,000 fewer than in April. And ADP’s private payroll report on Wednesday is expected to show a gain of 88,000 jobs, after a gain of 37,000 in May.
• Thursday’s jobs report for June is expected to show employers added 113,000 nonfarm jobs, after a 139,000 increase in May. Jobs growth has averaged 123,800 a month so far this year, down from the average 191,900 the previous two years.

What’s Next: The unemployment rate is expected to rise to 4.3% from 4.2%. While traders see the Fed’s next interest cut as likely to happen at the September meeting, an especially weak jobs report could put a July rate-cut into play.

— Dan Lam

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U.S.-Canada Trade Talks Restart After Tech Tax Scrapped

Trade negotiations with Canada, the second-biggest U.S. trading partner after Mexico, are back on. The two countries will try to reach an agreement later this month, after Canada ditched a digital services tax that President Donald Trump cited when he called an abrupt end to talks on Friday.

• Canada’s Prime Minister Mark Carney said Sunday that both nations will resume talks and work toward a deadline of July 21. Trump also agreed to restart negotiations, The Wall Street Journal reported.
• To bring the U.S. back to the table, Carney said Canada wouldn’t collect a digital services tax that was due to start Monday. Trump terminated discussions Friday, calling the tax a “direct and blatant attack” on U.S. technology companies, in a post on Truth Social.
• The proposed tax, which included retroactive revenue back to 2022, was a sticking point for the U.S. president as it would have hit Google parent Alphabet, Amazon, and Facebook owner Meta Platforms.
• Trade with Canada is equivalent to about 3% of U.S. gross domestic product. It is also the largest foreign market for U.S. exports and has a vital role in the U.S. car and energy industries.

What’s Next: It’s good news for the stock market and both countries, which trade heavily with each other and have been trying to work out new tariff arrangements since Trump took office. If more trade deals are struck before the 90-day pause on tariffs ends next week, it will be even better news for markets.

— Brian Swint

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Apple Takes a Bite Out of Hollywood With F1 Movie In Lead

Apple is best known for its iPhone and other devices and has been building a presence on the small screen. But this weekend it took aim at Hollywood. Its F1 the Movie, starring Brad Pitt, finished atop the domestic weekend box office with a $55.6 million debut.

• F1, directed by Top Gun: Maverick’s Joseph Kosinski, raked in another $88.4 million internationally, for a $144 million global weekend, according to Comscore. It also sold $27.7 million for large-format IMAX screens across China, South Korea, Japan, and the U.K.
• Comscore senior media analyst Paul Dergarabedian says F1 beat expectations, and Hollywood overall has been delivering this year after a slow start. Domestic box office sales reached $128 million for the weekend. Sales of $4.13 billion for the year through Sunday are 15.5% higher than 2024.
• Needham analyst Laura Martin called Apple’s Hollywood foray a distraction from other more pressing issues for investors, including an iPhone replacement cycle, an answer to GenAI, and a growth strategy from the AI revenue line. “Apple is in chaos right now,” Martin said.
• PG-rated films continue to dominate at the theaters. Comcast-owned Universal’s How To Train Your Dragon has sold more than $200 million domestically, and $454 million globally, since opening June 13. Walt Disney Pixar’s Elio has grossed $72.3 million globally, and Disney’s Lilo & Stitch has grossed over $545.9 million.

What’s Next: Releasing F1 on the big screen puts the film in the running for the Oscars, and could drum up new subscribers for Apple’s streaming platform. Apple CEO Tim Cook said Apple TV+ saw “record viewership” in its second-quarter, but hasn’t shared figures.

— Janet H. Cho and Angela Palumbo

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Storms Disrupt Expectations for Record Holiday Air Travel

Delta Air Lines and American Airlines are recovering after severe weather over the weekend forced thousands of delays and cancellations of flights starting Friday and continuing into Saturday. The disruptions marred the first weekend of what is expected to be a record period for holiday travel.

• Flights had started to normalize by Sunday, but about 25% of flights for both Delta and American were delayed as of around 6 p.m., according to FlightAware. Airports in Atlanta, Charlotte, and Washington, D.C., were the hardest hit.
• Delta said severe weather in Atlanta resulted in hundreds of system cancellations across the system for Saturday and that it expected additional disruptions as teams work to reset aircraft and reposition flight crews. American acknowledged it was working through issues related to weather.
• At the same time, AAA projects that 72.2 million people will travel at least 50 miles or more from home over the July 4 holiday, which it counts from June 28 to Sunday, July 6. The domestic travel forecast is 1.7 million more travelers than last year.
• Air travel is also expected to set a new record, AAA said. It projects 5.84 million people will fly to their destinations—some 8% of all Independence Day travelers. The forecast is 1.4% higher than the previous record last year of 5.76 million air travelers, it said.

What’s Next: In addition, AAA said 61.6 million people will travel by car this year, up 2.2% from last year and the highest volume on record. This July 4th holiday week is expected to see an additional 1.3 million road travelers compared with 2024.

—Liz Moyer

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MarketWatch Wants to Hear From You

The stock market shrugged off the U.S. bombing of Iran, the continuing global trade war and a Wall Street adage advising investors to “sell in May and go away”—and now looks to end June near record territory. But what risks should investors be aware of?

A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to thebarronsdaily@barrons.com.

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner