NEW YORK (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.' "