Wall Street closes its best quarter in six years, with second-half nerves

Good morning. U.S. stocks wrapped up the first half last night. The S&P 500 and Nasdaq posted their best quarter since 2020, and the Dow ended June at a record. Chipmakers did most of the heavy lifting.

Still, nobody is popping champagne. Doubts about whether all that AI spending will pay off wiped about $2.3 trillion from the seven biggest tech stocks in June, even as investors kept backing the companies that make the chips. Market commentators were nearly unanimous that a quarter like this is a hard act to follow, and that the second half could be bumpier.

Inflation and currencies are the wild cards. New Fed chair Kevin Warsh is saying as little as possible, which has only made the Street watch him more closely. Cleveland Fed president Beth Hammack went further, arguing that AI infrastructure demand is feeding inflation and that rate hikes may be needed. Meanwhile the yen sank to its weakest level since 1986, and the prospect of Japanese intervention rattled U.S. stocks too.

Elsewhere, small caps had their best first half since 1991, with the Russell 2000 up more than 21% this year, while bitcoin ETFs are heading for their worst month of outflows.