Tech Leads Market Gains as Canada Pauses Digital Tax to Restart Trade Talks

Global equities surged to intraday record highs on Monday, driven by optimism surrounding U.S. trade negotiations and a strategic pause by Canada on its controversial digital services tax targeting American tech companies. Both the S&P 500 and Nasdaq Composite closed at all-time highs, with strong contributions from the technology sector.

Adding to the bullish sentiment, the U.S. dollar experienced its worst performance for the first half of the year in over 50 years, enhancing the attractiveness of risk assets worldwide.

Trade Diplomacy: Canada and U.S. Reset Talks

Canadian Prime Minister Mark Carney and U.S. President Donald Trump have agreed to extend trade negotiations until July 21, seeking to finalize a comprehensive bilateral agreement. Initially, Trump set a July 9 deadline for reciprocal tariffs, but sources indicate many international deals could close before Labor Day (September 1).

Key points include:

• Canada’s withdrawal of its digital services tax just hours before enforcement, indicating goodwill.

• U.S. Treasury Secretary Scott Bessent indicated that without progress, the administration could revert to April 2 tariff levels, adopting a more aggressive stance.

Market Performance Snapshot

Monday’s rally primarily resulted from renewed investor confidence in trade policy stability, with window dressing effects enhancing momentum as Q2 closed.

Major Index Moves (July 1 close):

• Dow Jones: +275.50 pts (+0.63%) → 44,094.77

• S&P 500: +31.88 pts (+0.52%) → 6,204.95

• Nasdaq Composite: +96.28 pts (+0.48%) → 20,369.73

Technology led the gains with a 1% increase, while the consumer discretionary sector lagged among S&P 500 categories.

Dollar Down, Labor Data in Focus

The U.S. dollar index fell sharply, marking it as the worst-performing first half since the 1970s, pressured by sluggish economic data and market expectations for rate cuts.

Investors are now focused on a wave of upcoming labor market data, culminating in the nonfarm payrolls report on Thursday, which could heavily influence near-term Fed policy.

Use the Entreprenerdly Economics Calendar for real-time tracking of:

• Nonfarm payroll figures

• Unemployment rate

• Average hourly earnings

Fed Outlook: Divided But Dovish

Federal Reserve Chair Jerome Powell has reiterated a wait-and-see stance, arguing that additional time is needed to evaluate the inflationary effects of Trump’s evolving trade policy.

Key Fed voices:

• Atlanta Fed President Raphael Bostic still expects one rate cut in 2025.

• Chicago Fed’s Austan Goolsbee warned of a rare stagflation scenario where both unemployment and inflation could worsen simultaneously.

Explore the Personal Consumption Expenditures (PCE) model to gauge potential Fed responses based on inflation risk.

Conclusion

Markets have entered H2 2025 on a euphoric note, propelled by a declining dollar, constructive trade diplomacy, and dovish Federal Reserve expectations. However, critical labor market and inflation data loom, suggesting this optimism could be tested swiftly. Investors should prepare for increased volatility and closely monitor central bank commentary as global dynamics unfold.

Tip: Stay macro-aware by leveraging Entreprenerdly’s Economics Calendar and Labor Market Metrics in your strategy. This will help interpret central bank behavior before the markets react.