U.S. stocks maintained their gains by midday on Tuesday, as Wall Street prepared to close a robust first half and second quarter. The Dow Jones Industrial Average is on track for its best first-half performance in five years, while the Nasdaq Composite is poised to record its largest quarterly gain since 2020.

The Dow rose 135.26 points, or 0.26%, to 52,318.00. The Nasdaq climbed 326.19 points, or 1.26%, to 26,146.34. The S&P 500 increased by 48.91 points, or 0.66%, to 7,489.34.

This follows a broad rally on Monday, with market sentiment buoyed by a ceasefire between the U.S. and Iran. The S&P 500 advanced 1.18% and the Nasdaq Composite gained 2.07% in that session.

Market focus remains on developments in the U.S.-Iran situation. The two nations agreed to a temporary halt in mutual attacks on Sunday, allowing commercial vessels to pass through the critical Strait of Hormuz. A U.S. official stated on Sunday that "both sides will temporarily cease fire, and ships can pass freely."

In a report Tuesday morning, strategists at UBS noted that despite the optimistic start to the week, concerns persist regarding the sustainability of capital expenditure growth in artificial intelligence.

They wrote, "We believe allocation to AI-related stocks will be a key differentiator for long-term equity market performance, but we also see it as crucial to diversify both within and outside the AI space. This suggests investors might consider more defensive areas within the AI sector, such as data center operators and select payment companies, as well as other structural trends."

Tuesday marks the final trading day of both the first half and the second quarter.

The Dow has gained 8.6% in the first six months of the year, on pace for its best first half since 2021, when the index rose 12.7%. The S&P 500 is also up over 8% for the first half, while the Nasdaq has outperformed with an 11.1% gain. Furthermore, the Russell 2000 index has surged more than 21%, on track for its best first-half performance since the first half of 1991.

Market volatility was elevated early in the year. While major indices repeatedly hit record highs, this occurred against a backdrop of volatile energy prices due to the war involving Iran and uncertainty over the sustainability of AI spending.

However, equity performance in the second quarter has been particularly strong, as concerns over the AI trade have eased and the war appears to be nearing a conclusion.

The S&P 500 and Nasdaq are up approximately 14% and 19.6% for the second quarter, respectively, positioning them for their largest quarterly gains since the second quarter of 2020. The Dow has risen 12.6% over the same period, on track for its strongest quarterly performance since the fourth quarter of 2022.