The U.S. stock market faces a gauntlet of tests to keep its rally going in the second half of 2026, from the sustainability of AI spending to a high corporate earnings bar and the outlook for interest rates under a Federal Reserve with a new chairman. The benchmark S&P 500 (.SPX), opens new tab has climbed more than 8% so far this year, extending its bull run well over three years, while the technology-heavy Nasdaq Composite (.IXIC), opens new tab has increased by 11%. But investors have shown signs of unease recently, with those indexes pulling back in June.
Get a daily digest of breaking business news straight to your inbox with the Reuters Business newsletter. Sign up here. Here are major questions facing U.S. stock investors in the second half of the year:
CAN THE AI SPENDING THEME KEEP DRIVING THE MARKET? Massive spending on AI infrastructure has been at the heart of the market's rally, bolstering profit estimates for a wealth of companies. Five companies including Microsoft (MSFT.O), opens new tab, Alphabet (GOOGL.O), opens new tab and Amazon (AMZN.O), opens new tab are forecasting combined capital expenditures of about $730 billion this year, according to JPMorgan. "It is certainly priced in to the market that the level of capex that we're seeing will continue for the foreseeable future," said Nicolas Janvier, head of North American equities at Columbia Threadneedle Investments.
Some investors are wary that hyperscalers need to show sufficient returns on their spending. In the meantime, AI-driven optimism has sparked sharp gains in semiconductor shares, while also driving other tech stocks, industrials and energy shares tied to the buildout and powering of data centers. "The risk from the market's perspective is the technicals are so crowded within those trades that anything that starts to sow some seeds of doubt in the narrative and you are at a somewhat vulnerable position," said Garrett Melson, portfolio strategist with Natixis Investment Managers Solutions.
