US stocks climbed on the final trading day of the second quarter, with the Nasdaq on track for its best quarter since mid-2020, boasting a more than 20% gain. The S&P 500 followed suit with a 14% rise, also its strongest since the second quarter of 2020. This upward trend was significantly propelled by semiconductor stocks, with Intel jumping 4%, Advanced Micro Devices rising 3%, and Nvidia adding over 1%. The VanEck Semiconductor ETF alone was up 3% on Tuesday. Overall, the Dow added 123 points (0.2%), the S&P 500 rose 0.4%, and the Nasdaq advanced 0.8% on the day.
The robust performance in the second quarter was largely attributed to two main factors: ebbing US-Iran tensions and sustained investor enthusiasm for technology and AI. A ceasefire agreement between Washington and Tehran over the weekend, which included reopening the Strait of Hormuz for commercial shipping, sparked a market rally on Monday. This diplomatic breakthrough saw the S&P 500 close 1.18% higher and the Nasdaq up 2.07%. Oil prices, however, remained relatively stable on Tuesday, with U.S. West Texas Intermediate futures near $71 a barrel and Brent crude near $73, despite the diplomatic efforts.
Looking at the first half of the year, small-cap stocks were a notable standout, with the Russell 2000 climbing over 21%, a performance unmatched since 1991. Large-cap benchmarks also delivered solid results, with the Nasdaq growing more than 11%, and both the S&P 500 and the Dow each gaining over 8%. This marks the Dow's strongest January-through-June stretch since 2021. Despite some market volatility due to energy-price fluctuations and concerns about AI investment sustainability, buyers re-entered the market strongly at the start of the current week, pushing indexes higher. UBS strategists, while acknowledging ongoing questions about AI capital expenditure, advised clients to consider more defensive AI-related areas like data center operators and select payment companies.
