U.S. equity markets extended their upward march Monday, closing out June on a strong note even as Wall Street weighed several macroeconomic headwinds and geopolitical uncertainties.

The Dow Jones Industrial Average surged 275.50 points, or 0.63%, to close at 44,094.8. The S&P 500 rose 31.87 points, or 0.52%, ending the session at 6,204.94, while the Nasdaq Composite gained 96.27 points, or 0.47%, to finish at 20,369.7. The broader rally contrasted with mixed signals beneath the surface of the market.

Gold futures for August delivery advanced $31.80, or 0.97%, to settle at $3,319.40 as of 3:47 p.m. ET, continuing their steady climb amid safe-haven buying. Meanwhile, crude oil prices fell, with August West Texas Intermediate futures dropping $0.59, or 0.90%, to $64.93 .

The equity rally comes at a time of heightened caution among institutional investors. “If I’m honest, I’ve been a little uncomfortable with this rally,” said Kate Moore, Chief Investment Officer at Citigroup Inc.’s wealth division. “There are a number of warning flags that are not yet affecting investor sentiment—and I don’t understand why, frankly, they’re not on people’s near-term radars”.

Among the red flags is a significant downgrade in earnings expectations. Bloomberg Intelligence data shows that Wall Street’s projected S&P 500 profit growth has fallen from 13% earlier this year to just 7.1%, with Q2 estimates now sitting at 2.8%—the weakest in two years. FedEx Corp., viewed as a bellwether for economic activity, warned that President Trump’s reciprocal tariffs will depress its earnings this quarter.

Valuations also appear stretched. The S&P 500’s forward 12-month price-to-earnings ratio is at 22x, far above the 10-year average of 18.6x, making equities vulnerable if earnings disappoint.

Market breadth remains a concern. Gains are largely concentrated in a handful of tech stocks—such as NVIDIA and Meta—while Apple and Tesla have underperformed. The equal-weighted S&P 500 index has yet to make new highs, underscoring the fragility of the current rally.

Adding to investor anxiety is the approaching expiration of a 90-day tariff truce. With few nations finalizing deals with the U.S., the resumption of broad-based tariffs appears increasingly likely. President Trump recently pressured Canada to withdraw its digital services tax by threatening to cut off trade talks, a sign of his aggressive posture.

Middle East tensions, U.S.-China trade friction, and political uncertainty around the Federal Reserve's leadership further complicate the outlook. Trump’s repeated criticism of Fed Chair Jerome Powell has stirred speculation about the central bank’s future independence. “We are more cautious than constructive,” said Joe Gilbert, portfolio manager at Integrity Asset Management. “The outlook for the second half of the year is always framed by the starting point—and that starting point, from the perspective of valuation and earnings growth, is not that attractive”.

Despite these pressures, market momentum heading into the second half remains intact—for now.