Ending on a high note. The first half of the year ended with a bang on Tuesday, and while AI-driven tech was in the lead per usual, it wasn't alone.

The Dow Jones Industrial Average gained 0.3% while the S&P 500 rose 0.8% and the Nasdaq Composite added 1.5%.

"The technology sector has led the way higher this quarter...However, more recently, over the last month, we have seen a bit of rotation, with tech and AI-driven sectors down for the month, while areas like healthcare, industrials, and financials have moved higher," notes Edward Jones Head of Investment Strategy and Asset Allocation Mona Mahajan. "In our view, this rotation into more cyclical parts of the market could have legs."

There's a lot for bulls to like about that shift, and other trends are also giving investors reasons to be optimistic. Peace talks continue amid the still-hot Iran War, but Wall Street has largely written off the conflict , with oil prices dropping sharply from spring levels. ( Oil futures suffered their largest quarterly drop since 2020 on Tuesday.) Employment has also continued to hold up, consumer confidence is ticking higher, and new economic data has been largely benign, allowing strong earnings to take the stage.

"The U.S. is set to remain the clear growth leader among major developed markets, supported by a powerful AI-driven investment cycle, resilient corporate profits and a healthy labor market," write analysts at Capital Economics.

With a holiday-shortened week and a heat wave upon much of the country, investors are primed to look on the sunny side.

The Hot Stock: Sandisk Corporation +10.9% The Biggest Loser: Digital Realty Trust -5.8%

Best Sector: Information Technology +2.6% Worst Sector: Real Estate -2.2%

Second Half Hustle

Half of 2026 is in the rearview mirror. So, what comes next? Hopefully more of the same.

The second quarter of this year was a sometimes volatile, but ultimately strong era for markets. Bolstered by double-digit earnings growth, Q2 was the best quarter for the S&P 500 since the second quarter of 2020, and the best first half of a year for the index since 2021. That's the good news, but the bad news is that once again, expectations have risen.

For earnings to hit consensus estimates in the second half of the year, "margins will have to expand quite a bit -- enough to convert low-teens revenue growth into at least double that pace of earnings growth," notes LPL Financial Chief Equity Strategist Jeff Buchbinder. That's possible if tech takes the lead again, and if non-tech companies start to see some productivity boosts from artificial intelligence. "The AI boom should drive another quarter of S&P 500 EPS growth near 30% when all results are in," he writes.

Of course it's unlikely to be a straight shot up. In early June the Nasdaq suffered its largest one-day point decline on record, showing that tech may be the rally's fuel but also its Achilles heel. JPMorgan analysts warned last week that volatility would likely moderate from the first half, but still remain elevated.

The Federal Reserve will also be a market mover for the rest of 2026. Just last week, Bank of America economists said they now expect three interest rate hikes by the end of the year, up from their previous expectation that the central bank would keep rates steady.

Still, all's well that ends well. "History is clear on the rewards for strong earnings, because when S&P 500 earnings grow double digits, the average annual S&P 500 index return is 14.3% with gains in 10 of the past 12 years," notes Buchbinder. "This year should make it 11 out of 13."

The Calendar

FactSet Research Systems and General Mills announce earnings tomorrow.

ADP releases its National Employment Report for June. Consensus estimate is for a 118,000 increase in private employment, slightly less than May's 122,000 gain. In May, the median annual pay increase for employees who remained at their job was 4.4%, while those who changed jobs saw a 6.5% bump.

The Institute for Supply Management releases its Manufacturing Purchasing Managers' Index for June. Consensus estimate is for a 53.8 reading, slightly less than in May. The index has been above 50 every month this year, indicating growth in the manufacturing sector. In the previous three years there were only two monthly readings at or above 50.

-- Dan Lam

What We're Reading Today

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June 30, 2026 19:55 ET (23:55 GMT)

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