S&P 500, Nasdaq register best quarter since 2020 despite Iran war

• Technology and semiconductors led the rally, with a semiconductor index jumping 3.9% on the final day of the quarter, though BofA strategists suggest cyclical sectors like energy and financials may outperform in the second half
• Oil price spikes at the war's onset raised inflation concerns, with traders now pricing in at least one Fed rate hike by end of 2026
• The Dow closed at a record high of 52,319.20 for the second consecutive day, with advancing stocks outnumbering decliners on both major exchanges

Market Summary: S&P 500 and Nasdaq Post Best Quarter Since 2020

Key Performance Metrics

The S&P 500 and Nasdaq delivered their strongest quarterly gains since 2020, with the S&P 500 rising 14.9% and the Nasdaq surging 21.4% for Q2. The Dow Jones Industrial Average posted its best quarter since 2022, gaining approximately 13%. On June 30, markets closed higher with the Dow up 0.26%, the S&P 500 up 0.79%, and the Nasdaq advancing 1.52%.

Market Drivers

Investor optimism centered on strong economic growth and robust corporate earnings despite geopolitical tensions. The technology sector led gains, with semiconductor stocks jumping 3.9% on the final trading day. The Dow reached a record closing high for the second consecutive day, finishing at 52,319.20.

Geopolitical Context

Markets maintained momentum despite ongoing Middle East conflict involving Iran and the U.S. While a memorandum of understanding was signed on June 17 aimed at ending the four-month conflict, recent weekend exchanges tested the agreement. Rising oil prices at the war's onset heightened inflation concerns, with traders pricing in at least one Federal Reserve rate hike by end of 2026.

Forward Outlook

Following a strong Q1 earnings season, investors are anticipating positive Q2 results in coming weeks. BofA strategists recommend positioning in cyclical, value-oriented sectors like energy and financials for the second half of 2026. However, concerns persist regarding elevated tech valuations and substantial AI-related spending by technology companies.

Nike shares declined approximately 2% after-hours following quarterly results. Market breadth showed advancing issues outnumbering decliners by 1.06-to-1 on the NYSE, with 349 new highs versus 154 new lows.