U.S. equities ended Tuesday's session on a positive note, with the Nasdaq Composite leading the charge, rising 1.54% in after-hours trading. The broader market also posted gains: the S&P 500 advanced 0.87%, while the Dow Jones Industrial Average edged up 0.32%, according to Reuters/LSEG data.
The rally was notable for its breadth. Market data from MarketWatch showed that advancing stocks outnumbered decliners by 4,143 to 3,745, indicating that the upward momentum extended well beyond the usual AI heavyweights. This shift in breadth caught the attention of fund managers, who are now looking for signs that the second-half rally can sustain itself amid elevated valuations and a Federal Reserve that remains hawkish.
Breadth and Valuation Metrics
The gap between the S&P 500 and its equal-weighted counterpart has narrowed to approximately 3 percentage points, a significant compression from the 14-point gap seen earlier in 2026. This suggests the market is becoming less top-heavy, with gains more evenly distributed across sectors. However, valuation concerns persist. Bank of America's Bubble Risk Indicator stands at 0.91 for the PHLX Semiconductor Sector and 0.82 for the technology sector, both approaching danger zones.
The S&P 500's price-to-sales ratio sits at 3.22, well above its long-term average of 1.84. The index is trading at 20.2 times forward earnings, a level that, while not as extreme as the dot-com era's 25.2x, leaves little room for disappointing results.
AI Capital Spending Under the Microscope
Wall Street is closely monitoring AI-related capital expenditures. According to JPMorgan Chase data cited by Reuters, five major companies—including Microsoft (MSFT), Alphabet (GOOGL), and Amazon (AMZN)—are on track to spend approximately $730 billion this year. This level of investment has already been "priced in to the market," according to Nicolas Janvier of Columbia Threadneedle Investments. David Bianco, chief investment officer for the Americas at DWS, emphasized that earnings season will be the true test, stating "there can't be any excuses."
Economic Data and Labor Market
Economic data released Tuesday painted a mixed picture. Job openings rose to 7.594 million in May, exceeding the Reuters forecast of 7.30 million and reaching the highest level since May 2024. However, hiring declined by 45,000 to 5.170 million. Matthew Martin, senior U.S. economist at Oxford Economics, described the labor market as showing "signs of stabilization."
Consumer confidence edged up to 91.2 in June, according to the Conference Board, though the present situation index slipped. Chief economist Dana Peterson noted that "little change in the labor market" is expected over the next six months.
Commodities and Market Outlook
Oil prices slipped, with Brent crude closing 0.3% lower at $72.92 per barrel, ending the quarter down 38%. Meanwhile, traders continue to price in at least one Federal Reserve rate hike by late 2026, according to LSEG data.
In individual stock moves, NVIDIA (NVDA) rose approximately 2% in late trading. However, Microsoft remains down nearly 18% for the month, and Oracle (ORCL) has dropped about 35% in June. Nike (NKE) was set to report earnings after the close, offering a read on consumer spending ahead of the holiday week.
U.S. stock markets will be closed on Friday, July 3, for Independence Day. The June payrolls report is scheduled for release Thursday, with economists forecasting 110,000 jobs added and an unemployment rate of 4.3%.
