US stocks, especially in the technology sector, saw a boost after a period of selling driven by concerns about artificial intelligence. This rally was fueled by buyers who believe that the ongoing investment boom in AI will continue to support robust corporate earnings. The S&P 500 rose 1.2% and the Nasdaq 100 climbed about twice as much, making it the best quarter for equities in six years. A gauge of the "Magnificent Seven" megacaps, which had been underperforming earlier in the month, gained 2.6%.
Matt Maley, an analyst at Miller Tabak, described the bounce as a "welcome development for the bulls," emphasizing that the tech sector's performance will remain the primary driver for the stock market. He noted that while tech doesn't need to perpetually outperform, it must avoid significant declines due to its substantial weight in the S&P 500. Otherwise, individual investors might begin to move towards cash, especially given recent discussions about market bubbles.
The stock market's resurgence has defied skeptics, occurring amidst international conflicts, an oil supply shock, and inflation worries. Since its low three months prior, the US equity benchmark has staged one of its quickest rebounds this century, increasing 20% from its March 30 low to its June 2 peak. This magnitude of rebound has only happened three other times since 2000.
JJ Kinahan of Cboe Global Markets advised investors to expect volatility as the quarter and first half conclude, leading to institutional fund managers rebalancing their portfolios. Despite these movements, he suggested not to "overthink it." Calm also prevailed in the Treasury market after the US Supreme Court ruled that Federal Reserve Governor Lisa Cook could maintain her position, reinforcing the central bank's independence. This decision removes a potential "persistent risk premium" to US dollar-based assets, according to Michael Reynolds at Glenmede, contributing to a stable long-term rate outlook.
In other news, peace talks between President Donald Trump and Iran are set to resume, helping to calm oil prices after a series of reciprocal attacks. The yen also reached its weakest point against the dollar since 1986 following a small drop.
