US stocks concluded a robust second quarter and first half of 2026, with the S&P 500 gaining 0.8% and the Nasdaq Composite rallying 1.5% on the final day of the quarter. The Dow Jones Industrial Average edged up nearly 0.3%, closing above 52,000 for the first time and posting a fresh record. This performance capped the best quarter for the S&P 500 and Nasdaq since 2020. Over the entire second quarter, the S&P 500 surged by 14.9%, and the Nasdaq Composite skyrocketed by 21.4%, primarily fueled by a significant rally in chip stocks and the artificial intelligence (AI) boom. The Philadelphia Semiconductor Index (SOX) recorded an unprecedented 88% quarterly surge, with stocks like Micron Technology up 242%, AMD up 186%, Broadcom adding 22%, and Nvidia rising 15%.
The strong market performance occurred despite ongoing geopolitical tensions, particularly a four-month-old conflict in the Middle East involving Iran and the US, and concerns over potential interest rate hikes. While a memorandum of understanding was signed between the US and Iran on June 17 aimed at ending the conflict, exchanges of fire over the weekend tested the agreement, and high-level peace talks in Qatar faced uncertainty. Despite these tensions, investors remained optimistic about economic and earnings growth, with Oliver Pursche of Wealthspire Advisors noting it was a "great first half of the year, certainly better than most expected." The market also brushed off rising concerns about inflation, with the Federal Reserve's core index at 4.1%, far exceeding its 2% target, leading traders to price in at least one more Fed interest rate hike by the end of 2026.
Contributing to market resilience were factors like a Supreme Court ruling that maintained Federal Reserve independence and falling energy costs as oil flows through the Strait of Hormuz recovered faster than anticipated, shifting fears from crude shortages to a looming glut. Brent futures traded below $74 a barrel and WTI futures below $70. Notably, the anticipated initial public offering (IPO) of SpaceX on June 12 also injected significant capital and boosted market sentiment, though concerns about AI stock overvaluation emerged. The relentless rise of the dollar, pushing the yen to a 40-year low, also presented a concern, with HSBC warning of an "explosive" rally if the Federal Reserve signals further tightening. Despite some volatility in June, where the S&P 500 fell 1.1% and the Nasdaq dropped 2.8%, the quarter concluded with overall strong gains.
