The S&P 500 posted its strongest quarterly performance in six years, adding more than $8 trillion in market value as a capital spending boom and chipmaker rebound overwhelmed geopolitical headwinds.
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S&P 500 adds $8 trillion in Q2 as capital spending fuels rally
The S&P 500 surged 14.87% in the second quarter, its best six-year performance, adding over $8 trillion in market value as capital spending drove the rally.
"What a quarter for stock investors! Brushing aside war and other worries, the Nasdaq gained 21% and the S&P 15%, their largest quarterly returns in six years," said Mohamed A. El-Erian, an economist at Allianz.
Technology stocks led the charge, with the Nasdaq Composite jumping 21.41% for the quarter to close at 26,213.72. The Dow Jones Industrial Average rose 12.9% to 52,319.20. A blockbuster chip rally added roughly $2 trillion in combined market capitalization to Micron Technology Inc., Intel Corp. and Advanced Micro Devices in the period, according to a CNBC report.
The rally has broadened beyond mega-cap AI names. The Russell 2000 surged 21.86% in the first half, its best H1 since 1991, showing that smaller companies are participating in the capital spending cycle. Investors now turn to Federal Reserve Chairman Kevin Warsh's speech Wednesday at the ECB Forum and the June non-farm payrolls report later this week for clues on whether the economy can sustain the momentum.
Chips Lead the Charge as AI Spending Accelerates
Semiconductor stocks were the standout performers, with the Philadelphia Semiconductor Index rallying more than 30% in the quarter. Nvidia Corp., the world's most valuable company at over $4.7 trillion, rose 2.6% on Tuesday alone, while AMD surged 7% and Intel gained 6%. AMD has climbed 265% over the past 12 months, driven by data center revenue that jumped 57% year over year to $5.8 billion in the first quarter. The company reported Q1 revenue of $10.25 billion, beating the $9.89 billion consensus, and guided for Q2 revenue of roughly $11.2 billion, representing 46% year-over-year growth.
The chip rally has created a valuation divergence between memory makers. Micron Technology, up roughly 300% year to date, trades at a forward price-to-earnings multiple of seven with a market cap near $1.2 trillion. Sandisk Corp., up more than 780% this year, commands a forward P/E of 32 despite a market cap of roughly $300 billion, according to analyst estimates.
Cross-Asset Moves and the Week Ahead
Treasury yields edged higher, with the 10-year note at 4.457%, while spot gold declined to around $3,978.70 an ounce. Crude oil prices climbed, with WTI futures rising 0.6% to $69.94 a barrel and Brent at $72.92, as markets monitored U.S.-Iran developments. The U.S. dollar index held steady as traders weighed the implications of a potential rate hike later this year.
For the first half, the S&P 500 gained 9.55%, the Dow rose 8.85% and the Nasdaq climbed 12.79%. The Dow's first-half performance was its best in five years. Markets will be closed Friday for Independence Day, with the June ISM Manufacturing PMI and non-farm payrolls report due earlier in the week. Overnight, Dow futures slipped 0.22%, suggesting a cautious open as traders digest the quarter's gains.
This article is for informational purposes only and does not constitute investment advice.
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