US stocks ended their best quarter in six years, with the S&P 500 poised for an 8% gain for the first half of the year, its best since 2021. The Nasdaq 100 was on track for an 18% gain, marking its best three-month stretch since the pandemic and its second-best quarter in about 25 years. The Dow Jones Industrial Average was also set to post an 8% gain for the first half. The market rally was fueled by strong corporate earnings, with approximately 85% of S&P 500 firms surpassing earnings estimates for the second quarter, the highest percentage in five years, and earnings expected to grow by 23% year-over-year for the current quarter.
A significant driver of these gains was the tech and AI sector, particularly chip and memory stocks. The Philadelphia Semiconductor Index experienced an unprecedented surge, gaining 80% since the end of March, marking its best-ever quarter. Companies like Sandisk led the charge with a 764% increase, followed by Micron Technology at 301%, and Western Digital at 278%. Intel (257%), Seagate Technology Holdings (252%), Marvell Technologies (229%), and Corning (192%) also saw substantial gains. This focus on AI hardware contrasted with the lagging performance of the "Magnificent Seven" stocks, which had previously been the primary engine of broader market gains.
Contributing to the market's positive sentiment was the de-escalation of tensions between the US and Iran. A preliminary peace deal was reached, and both nations agreed to halt strikes and allow commercial ships to pass safely through the Strait of Hormuz. This geopolitical development helped reverse significant losses experienced earlier in the year when hostilities between the US and Iran caused major indexes to drop around 10% by late March. Investors had been pricing in a resolution to the conflict, though concerns about oil prices, which saw Brent crude drop almost 40% over the past three months, persisted.
Globally, stocks also saw significant increases, with the MSCI All-World index gaining 14% for the quarter and reaching a record high, marking its best quarterly performance since 2020. Emerging market stocks rose 23%. The yen, however, slid to a 40-year low against the dollar, while gold saw a 14% quarterly drop due to expectations of US interest rate hikes. The US dollar strengthened, posting its fourth consecutive quarterly rise against a basket of peers.
As of the end of the quarter, the S&P 500 stood at 7,461.59, up 0.28%; the Dow Jones Industrial Average was at 52,202.72, up 0.04%; and the Nasdaq 100 reached 30,077.18, up 1.02%. Analysts anticipate a further 21% price increase in the S&P 500 over the next 12 months, with all sectors expected to gain at least 10%.
