NEW YORK, June 27 (Reuters) -

Investors who have been captivated by recent geopolitical

events are poised to shift their attention in the coming week to

key economic data and policy developments to see if the torrid

rally in U.S. stocks extends higher.

The benchmark S&P 500 and Nasdaq Composite

both tallied record highs on Friday for the first time in

months, helped by optimism about interest-rate cuts and trade

deals. Easing tensions in the Middle East also paved the way for

the latest bump higher in stocks, as a conflict between Israel

and Iran appeared to calm after missile strikes between the two

nations had set the world on edge.

Focus will shift to Washington in the coming week. President

Donald Trump wants his fellow Republicans to pass a sweeping

tax-cut and spending bill by July 4.

Investors also get a crucial view into the U.S. economy with

the monthly employment report due on Thursday. U.S. stock

markets are closed on Friday, July 4, for the U.S. Independence

Day holiday.

Citigroup's ( C/PN ) U.S. economic surprise index has been

weakening, indicating that data has been missing Wall Street

expectations, said Matthew Miskin, co-chief investment

strategist at Manulife John Hancock Investments.

"After some softer May data, the June data is really going

to be under a microscope," Miskin said. "If the data

deteriorates more, it may get the market's attention."

U.S. employment is expected to have climbed by 110,000 jobs

in June, according to a Reuters poll -- a slowdown from May's

139,000 increase.

Data on Thursday showed the number of Americans filing new

applications for jobless benefits fell in the prior week, but

the unemployment rate could rise in June as more laid-off people

struggle to find work.

"The labor market right now is front and center over the

next few weeks," said Brent Schutte, chief investment officer at

Northwestern Mutual Wealth Management.

Employment data could factor into expectations for when the

Federal Reserve will next cut interest rates, with investors

also watching to see if inflation is calming enough to allow for

lower rates.

Fed Chair Jerome Powell has been wary that higher tariffs

could begin raising inflation, a view he told the U.S. Congress

this week. Some Fed officials have talked about a stronger case

for cuts. Trading of fed funds futures in the past week

indicated ramped-up bets for more easing this year.

The level of tariffs could come into sharper view with a

July 9 deadline for higher levies on a broad set of countries.

U.S. Treasury Secretary Scott Bessent on Friday said trade deals

with other countries could be done by the Sept. 1 Labor Day

holiday, citing 18 main U.S. trading partners.

Stocks have rebounded sharply since plunging in April

following Trump's "Liberation Day" tariff announcement, as the

president pulled back on some of the most severe tariffs. This

eased fears about a recession, but markets could remain

sensitive to trade developments.

Investors also will focus on the U.S. fiscal bill in

Congress for indication of the extent of stimulus in the

legislation and how much it could widen federal deficits.

With a roller-coaster first half nearly complete, the S&P

500 is up about 5% so far in 2025. Over the past 15 years, July

has been a strong month for stocks, with the S&P 500 increasing

2.9% in July on average, Wedbush analysts noted in a report this

week.

Second-quarter U.S. corporate earnings season kicks off in

the coming weeks, with concerns over how much tariffs may be

biting into company profits or affecting consumer spending. S&P

500 earnings are expected to have climbed 5.9% in the second

quarter from a year earlier, according to LSEG IBES data.

"We've been in a geopolitically focused market over the past

several weeks," said Josh Jamner, senior investment strategy

analyst at ClearBridge Investments. "I think the dawn of

earnings season ... will refocus the market back towards

fundamentals."