NEW YORK, June 27 (Reuters) - Investors have shifted

from panicking about tariffs to relief buying, lifting the U.S.

stock market storm back to record highs as corporate earnings

and the U.S. economy held up better than many had expected

through a period of dramatic policy change.

The S&P 500, seen as the benchmark for the U.S. stock

market, closed at 6,173.07 on Friday, up 0.5% on the day -- its

first close above 6,144.15, its previous all-time closing high

from February 19.

In the intervening period, the S&P 500 fell as much as 18.9%

on a closing basis from the February level to April 8, nearly

enough to label the decline a bear market. Stocks plunged after

President Donald Trump's "Liberation Day" tariff announcement on

April 2 sparked broad concerns about an impending recession.

Worries eased as Trump moderated his harshest tariffs, and

the market rebounded.

The Nasdaq Composite also closed at a record

high on Friday, its first all-time peak since December 16,

confirming the tech-heavy index is in a bull market.

Stocks got their latest boost this week from easing

fears about conflict in the Middle East after Trump's

announcement of a ceasefire between Israel and Iran and optimism

about the Federal Reserve lowering borrowing costs in coming

months.

The past four months in the market reflected deep concerns

about Trump's trade and tax policy, said Rick Meckler, partner

at Cherry Lane Investments in New Jersey.

"In the investment public's mind, it went from a sense of

tremendous pessimism to what seems to be optimism that this will

all fall into place," Meckler said. Policy risk, however, is

"still there."

As worries eased, volatility measures have fallen

dramatically. The Cboe Volatility Index, an options-based

measure of investor anxiety, spiked in early April, hitting 60

and closing as high as 52.33 on April 8, its highest closing

level in five years.

The VIX index has since receded to just above 16, below its

long-term median of 17.7.

The market appears to be pricing downside risk at levels

similar to those seen before early April, when Trump unveiled

his tariffs, said Garrett DeSimone, head quantitative analyst at

OptionMetrics. But unlike the post-election rally late last

year, sentiment does not appear excessively bullish or

complacent, he said.

Investors said a stronger-than-expected first-quarter

earnings season for U.S. companies helped drive the rebound in

stocks. S&P 500 company profits overall rose 13.7% from a year

earlier, compared to an 8% gain expected as of April 1,

according to LSEG IBES.

"This was one of the most furious comebacks ever from a near

bear market, as trade worries were overblown, but so were all

the recession calls," said Ryan Detrick, chief market strategist

at Carson Group. "The economy is hanging in there and overall

first-quarter earnings were quite solid, sparking the huge

rally."

However, investors appear to be more concerned about the

corporate outlook from here. Estimates for earnings growth for

each of the next four quarters have fallen from expectations at

the start of April.

Investors have grown more upbeat about the stock market.

Bearish sentiment in early April had reached its highest levels

since the financial crisis, according to the weekly American

Association of Individual Investors (AAII) Sentiment Survey.

While sentiment has trended more positively, bullish

sentiment is still below the historical average.

Also driving the rally has been renewed strength of the

"Magnificent Seven" megacap tech and growth stocks. That group,

which includes Microsoft ( MSFT ), Nvidia ( NVDA ) and Amazon ( AMZN )

, had led equity indexes higher the prior two years but

had gotten off to a rocky start in 2025.

Since April 8, the Roundhill Magnificent Seven ETF

has jumped about 37% against a roughly 24% rise for the S&P 500.

Fueled by the Magnificent Seven, the S&P 500 posted

back-to-back annual gains of over 20% in 2023 and 2024. Even

with the latest record-high push, the index is up about 5% in

2025.

"I don't think anyone is really thinking this is an

explosive year as the last two were," Meckler said. "I think

it's more, 'Gee, we've come back a long way from the sell-off,

and if we finish the year positive 5% to 10%, that would be a

great year, given all that's happened.' "