S&P futures were elevated on Tuesday following the Dow Jones Industrial Average reaching a new record close, as Wall Street prepares to conclude a robust first half and second quarter. Dow futures increased by 95 points, representing a 0.2% rise. S&P 500 futures and Nasdaq 100 futures exhibited an increase of less than 0.1%. Stocks experienced an upswing during Monday’s session, as a cessation of hostilities between the U.S. and Iran bolstered market sentiment. The S&P 500 rose 1.18%, while the Nasdaq Composite gained 2.07%.
On Sunday, the United States and Iran reached an agreement to cease their attacks and permit commercial vessels to transit the crucial Strait of Hormuz waterway. A U.S. official conveyed on Sunday that “both sides will stand down for now and vessels can move freely.” In a note on Tuesday morning, strategists indicated that, despite an optimistic start to the week, apprehensions regarding the sustainability of AI capital expenditure growth persist. “We believe that exposure to AI-related stocks will remain a key differentiator for equity market performance over the long run, but we also believe diversification, both within and beyond AI, is essential,” they wrote. “This indicates that investors may evaluate more defensive sectors within the AI landscape, including data center operators and certain payment firms, alongside other structural trends.”
Tuesday signifies the conclusion of the first half and the second quarter. The Dow has climbed 8.6% in the first six months of the year, putting it on pace for its best first-half performance since 2021, when it jumped 12.7%. The S&P 500 has increased by over 8% in the first half, whereas the Nasdaq has shown superior performance with an 11.1% rise. The beginning of the year was marked by significant fluctuations. While the major averages reached all-time highs, they accomplished this amidst significant fluctuations in energy prices attributed to the Iran war, alongside concerns regarding the sustainability of AI expenditures.
The second quarter of the year, however, has demonstrated notable strength for stocks, as apprehensions surrounding the AI trade have diminished and the conflict seems to be approaching a resolution. The S&P 500 and Nasdaq experienced increases of nearly 14% and 19.6%, respectively, in the second quarter, positioning themselves for their most substantial quarterly gain since the second quarter of 2020. The Dow has gained 12.6% in that time, on track for its strongest quarter since Q4 2022.