Stocks closed higher yesterday, building on the gains from last week. The S&P and Nasdaq made another new all-time in the process.

Last Friday, stocks wavered after reports that President Trump had canceled trade negotiations with Canada, citing their European-style Digital Services Tax on American companies. The President said he would announce the additional 'reciprocal' tariffs Canada will have to pay after the 90-day pause expires in July.

But over the weekend, Canada said it would scrap the Digital Services Tax. And both parties have agreed to resume negotiations.

The market cheered the news yesterday. As well as last week's news that the U.S. and China have agreed on a trade deal framework.

Additionally, it's expected that a trade deal with India will be announced shortly.

Trade deal optimism continues to lift stocks, which is a sharp contrast to the fear the initial tariff announcement had on stocks just a few short months ago.

The modest inflation readings are also underpinning the market. While last week's PCE index showed core inflation tick up one-tenth of a percent, the PCI, CPI and PPI have all shown inflation readings fall from earlier in the year.

The Fed also doesn't seem overly concerned with the outlook on inflation given they are still expecting two rate cuts this year. In fact, Federal Reserve Governor Christopher Waller recently said that he believes the Fed could begin lowering rates again as early as July's meeting. The odds are still on for the September meeting. But a couple more reports showing inflation continuing to ease could tilt the odds into July's favor. The July meeting takes place on July 29-30.

The market is also expressing relief at the easing of Middle East tensions.

And with earnings season right around the corner (stocks typically go up during earnings season, and last earnings season was no exception), people appear even more optimistic for the bull market to reach new heights.

In other news, yesterday's Chicago PMI came in at 40.4, just under last month's 40.5 reading, but above views for 43.0.

And the Dallas Fed Manufacturing Survey improved to -12.7 vs. last month's -15.3. The Production Index also improved to 1.3 vs. last month's 0.9.

Today we'll get the PMI Manufacturing Index, the ISM Manufacturing Index, Construction Spending, and the Job Openings and Labor Turnover Survey report (or JOLTS for short).

But the report everybody is really waiting for is Thursday's Employment Situation report. That will come out a day early, given the market is closed on Friday in observance of the July 4^th Holiday.

Looks like a busy week will be made even busier given the shortened trading week.

But the market and the economy appear to be in a good place right now.

And it looks like there's plenty more upside to go.

See you tomorrow,