Nasdaq heads for 20% quarterly gain, S&P 500 best since 2020

Wall Street's benchmark indices are closing the second quarter with double-digit advances, shrugging off geopolitical tensions and AI-sector uncertainty.

The Nasdaq Composite is on track to wrap the quarter with a roughly 20% gain, while the S&P 500 heads for its strongest quarterly performance since 2020.

"The market has shown remarkable resilience, absorbing shocks from both the geopolitical front and the AI narrative shift," said Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management. "Earnings growth and a resilient consumer have provided the foundation."

On Monday, the Nasdaq surged 522.53 points, or 2.07 percent, to close at 25,820.14, powered by a rally in mega-cap technology and semiconductor names. The S&P 500 added 86.39 points, or 1.17 percent, to 7,440.41, while the Dow Jones Industrial Average rose 306.63 points, or 0.59 percent, to 52,182.74. The Invesco QQQ Trust, which tracks the Nasdaq-100, has gained more than 20 percent in the past quarter alone, according to fund data.

The rally has broad implications for portfolio positioning heading into the third quarter. With the S&P 500 trading near its 52-week high of 7,620.90 and the Nasdaq within striking distance of record levels, fund managers face a choice between locking in gains or riding momentum into what is historically the weakest period for equities.

Technology and communication services have led the advance, with the Philadelphia Semiconductor Index posting double-digit gains for the quarter. Energy and materials have lagged, weighed down by falling crude prices and concerns about global demand. On Monday, the S&P 500 traded between 7,348.88 and 7,444.32 on volume of 3.485 billion shares, while the Dow ranged from 51,949.54 to 52,311.63.

The rally has unfolded against a backdrop of geopolitical crosscurrents. Iran and the U.S. agreed to hold their fire over the weekend, ending a series of strikes that had threatened the fragile ceasefire, according to reports. That détente helped fuel Monday's risk-on move, with traders also citing quarter-end "window dressing" by fund managers seeking to present attractive holdings on their quarterly statements.

"It might be a little bit of light liquidity due to the holiday-shortened trading week, so you might see bigger-than-expected moves," said Joe Tigay, portfolio manager at Equity Armor Investments. "We also have the end of quarter happening soon, which can cause some window dressing to happen."

Cross-asset dynamics have reinforced the equity rally. The U.S. dollar traded mixed on Monday, with the euro strengthening 0.38 percent to $1.1427 and sterling gaining 0.47 percent to $1.3262, while the yen slipped 0.11 percent to 161.92 per dollar. The weaker dollar has provided a tailwind for multinational earnings and emerging-market equities, with the iShares MSCI Emerging Markets ETF also gaining more than 20 percent this quarter.

Global markets have painted a mixed picture. Hong Kong's Hang Seng Index surged 1.57 percent to 23,026.68, while the Shanghai Composite added 1.16 percent to 4,073.90. European benchmarks edged lower, with the DAX falling 0.18 percent and the CAC 40 dropping 0.21 percent, as investors weighed the divergence between U.S. economic resilience and a slower recovery in the eurozone.

Looking ahead, the market faces a critical test this week with key U.S. payrolls data and central bank speeches scheduled. The Federal Reserve's policy path remains the dominant variable for the second half of 2026, with traders pricing in a potential rate cut in the fourth quarter. For now, the second quarter's gains have defied the skeptics — but whether they can hold into year-end remains an open question.

This article is for informational purposes only and does not constitute investment advice.