U.S. stock indexes surged last week, with the S&P 500, Nasdaq, and Dow all posting solid gains. But the optimism comes with a layer of caution as legal battles over recent federal trade policies are still unfolding in Washington.

There’s an ongoing lawsuit challenging the executive authority used in rolling out tariffs earlier this year. While markets appear to be brushing off the issue for now, the outcome could impact how future trade deals are enforced. Investors are watching closely.

Despite the legal cloud, the indexes bounced back in a big way. The S&P 500 rose 5.3 percent last week. The Nasdaq surged 7.2 percent, and the Dow climbed 3.4 percent. This marks a sharp turnaround from the declines we saw in April when tariff concerns pushed stocks lower.

One of the key reasons for the rally is a 90-day pause in new U.S.-China tariffs. The pause has given investors a reason to breathe and re-enter the market. However, it’s worth noting this is not a resolution. Talks are ongoing, and a permanent deal is far from guaranteed.

Magnificent 7 Does The Heavy Lifting

Much of the momentum is coming from large-cap tech stocks, which had a rough start to the year. Now, names like Nvidia, Tesla, Microsoft, and Amazon are back in focus. Nvidia alone has jumped over 30 percent in the past month, and Tesla isn’t far behind. Together, the major tech stocks are driving more than half of the S&P 500’s gains this month.

Goldman Sachs recently raised its year-end target for the S&P 500 to 6,100. That’s based on strong performance from the “Magnificent Seven” tech companies, combined with improving investor sentiment around AI and earnings stability.

Fed in Chill Mode

On the policy side, the Federal Reserve hasn’t made any major moves. Interest rates remain steady. While there’s speculation about a possible rate cut in July, nothing is confirmed. Inflation and job numbers will play a key role in that decision.

This week, the market isn’t expecting any major data releases, but several Fed officials are scheduled to speak. Their tone could set the pace for how markets move in the short term.

In summary, stock indexes are rising thanks to easing trade tensions and a tech rebound, but the path forward still depends on legal outcomes, Fed policy, and whether temporary pauses can lead to permanent deals.