Key facts
- US stocks are experiencing their best quarterly performance in years.
- The Dow Jones Industrial Average is on track for its best first-half performance since 2021.
- The Nasdaq 100 is set for its best three-month stretch since the pandemic.
- Chip and memory stocks have driven significant gains, with the Philadelphia Semiconductor Index having its best quarter ever.
- Around 85% of S&P 500 companies have beaten earnings estimates for the second quarter.
- Easing tensions between the US and Iran have contributed to market optimism.
US stocks are concluding the first half of the year with their strongest performance in years, driven by a confluence of factors including easing geopolitical tensions, a robust rally in technology and chip stocks, and better-than-expected corporate earnings.
The Dow Jones Industrial Average is on track for an 8% gain in the first half, its best performance since 2021. The Nasdaq 100 is poised to finish the quarter with an 18% gain, marking its best three-month stretch since the pandemic and its second-best quarter in approximately 25 years. The S&P 500 is also set for an 8% gain in the half, while the small-cap Russell 2000 is on track for a significant 21% increase, its best first-half since 1991.
Markets experienced volatility earlier in the year, with geopolitical concerns and profit-taking impacting stocks. A significant drop of around 10% occurred in late March, attributed to hostilities in the Middle East and the closure of the Strait of Hormuz. However, a subsequent rally has propelled indexes to new heights.
Three primary forces have fueled this market surge. Firstly, waning tensions between the US and Iran have provided a significant boost. Investors have responded positively to a preliminary peace deal and assurances of safe passage for commercial ships through the Strait of Hormuz, despite ongoing uncertainties.
Secondly, a powerful rally in chip and memory stocks has been a major driver. The Philadelphia Semiconductor Index is on track for its best-ever quarter, soaring 80%. Companies like Sandisk, Micron Technology, Western Digital, and Intel have posted substantial year-to-date gains, benefiting from investor focus on AI hardware.
Thirdly, US companies have delivered a stellar earnings season. As of early June, approximately 85% of S&P 500 firms beat earnings estimates for the second quarter, the highest percentage in five years. Analysts are forecasting a 21% price increase in the S&P 500 over the next 12 months, with all sectors expected to see gains of at least 10%.