[Feature: Market Wrap] The First Half: Risk Assets Cheered, Bonds and the Dollar Hit the Brakes

On the last trading day of the first half of 2026, New York closed the half-year ledger with all four major indices up together. The S&P 500 and Nasdaq posted their best quarter in six years; the Russell 2000, its best first half since 1991. But lift one layer and the market did not run in a single direction. Equities and the volatility gauge shout "risk-on is back," while the dollar and the policy-rate path (bets on a near-term hike) say "the tightening isn't over" — and with the long end flat, the curve simply flattened. That divergence is the starting line for the first day of the second half.

🇺🇸 US — A Quarter-End Semiconductor Rally Lifted the Indices

Four major indices (June 30 close)

• Nasdaq 26,213.72 (+1.52%) — a tech-stock recovery led the index
• S&P 500 7,499.36 (+0.79%) — near an all-time high
• Dow 52,319.20 (+0.26%) — extending gains after first clearing 52,000 the prior day
• Russell 2000 3,024.37 (+0.46%)

What moved — The big rally was concentrated on June 29; June 30 was its extension. The engine was semiconductors. The Philadelphia Semiconductor Index rose +3.83%, AMD hit an all-time high (in the +7% range), and KLAC, AMAT, LRCX, and Astera Labs surged. Nvidia, for its part, was quiet in the +1% range. It's a signal that the bet has broadened from a single name ("AI = Nvidia") to front-end equipment, interconnects, and smaller AI plays (Tesla joined too, in the +8% range). Still, this is a read laid on top of one day's move, so it may be quarter-end flow noise. Whether the broadening is real — early July's follow-through is the test line.

Quarter and first-half scorecard

• Nasdaq Q2 about +19.6%, S&P Q2 about +14% — both the best quarter since Q2 2020
• Dow Q2 +12.6%, first half about +8% — the best first half since 2021
• Note: first-half index returns vary by source, so they're given as ranges (S&P +8 to +9.6%).

Macro — a signal split in two

• VIX 16.45 (-6.8%) · WTI $70.03 (-1.02%) — with the US–Iran ceasefire and the reopening of the Strait of Hormuz, oil steadied and risk appetite returned
• Dollar index about 101.3 — near a 13–15-month high, up +2% over June · 10-year around 4.38%, flat (approximate June 30 close)

Where the asymmetry sits — At the June 17 FOMC, new chair Kevin Warsh came out hawkish from his first meeting ("there's work left to do on price stability"), and bets on a September hike repriced from ~29% to ~70%. Equities buy the growth that AI and earnings point to; the dollar and the policy-rate path price in, ahead of time, the Fed's next move that such growth will summon. The two are less opposing weights than two expressions of one strong-economy regime. The question is where the threshold lies at which those high rates and a strong dollar, on a lag, bite into valuations. What held the first half up was "over risk," not "because risk vanished."

🇰🇷 Korea — Foreigners Sold a Storm; Institutions and Retail Absorbed It

The strong dollar from the US section returns here. If that same dollar strength was the rally's ankle weight in New York, in Seoul it was the engine of foreign selling — if the US market is a "risk-on vs. tightening" divergence, the Korean market is a "fundamentals vs. flows" one.

Indices (June 30 close, last trading day of the first half)

• KOSPI 8,476.48 (+0.97%) — rose as much as +2.79% intraday (8,627) before late foreign selling gave back the gain
• KOSDAQ 916.18 (-0.48%) — a correction a single day after the prior session's record +8.13% surge, with battery (secondary-cell) weakness leading the drop

Flows — foreigners vs. institutions and retail

• KOSPI: foreigners −3.8174 trillion won (net sellers for an 8th straight session) / institutions +2.9361 trillion won / retail +833.5 billion won
• Foreigners net-sold about 26 trillion won cumulatively from June 19 to 30; June 29's −7.7332 trillion won in one day was a record daily high
• KRW/USD 1,549.4 (+4.2 won) — just under 1,550, where the fear of FX losses was the trigger that amplified foreign selling

What moved, and why — The Korean market was the tug-of-war itself: "semiconductor fundamentals vs. foreign flows." Samsung Electronics (+3.41%, 334,000 won) and SK Hynix (+0.84%), with chip-equipment names (Jusung Engineering +14.67%), pulled it up; secondary-cell names like LG Energy Solution (in the -8% range) and Ecopro (-6.69%) pressed it down. The battery plunge reads as flows crowding into semiconductors layered with profit-taking that unwound the prior day's +8.13% KOSDAQ surge (chips up, batteries down are two ends of the same rotation). Some outlets read the foreigners' 26-trillion-won selling as "mechanical rebalancing" driven by a jump in Korea's and chips' index weights, but the active capital-flight motive — avoiding FX losses with the rate just under 1,550 — is hard to dismiss. The two readings coexist, and the late give-back of gains doesn't rule out the latter. So even as institutions and retail absorbed the supply, the close settled at a firm-but-flat finish that had handed back a fair share of the intraday high (+2.79%).

First-half scorecard — What's clear is that the memory super-cycle (surging HBM, DRAM, and NAND prices) made Samsung and Hynix the index's engine. The KOSPI also rose sharply from the start of the year, but the exact full-period return conflicts across sources (foreign outlets cite up to roughly a doubling), so it's too early to assert.

📅 Today's Watch Points (July 1) — Day One of the Second Half, a Place of Testing

• 🇺🇸 ISM Manufacturing PMI (23:00 KST) — consensus about 53.6 (prior 54.0). The biggest macro event in today's US session. Whether a reading above 50 confirms continued expansion.
• 🇺🇸 ADP private payrolls — about +105K (prior +113K). After yesterday's (June 30) JOLTS came in at 7.594M for May, well above consensus and laying down "firm labor demand," this is the middle leg of three straight labor prints — ADP today, the jobs report tomorrow (July 2).
• 🇺🇸 Sintra Forum, Chair Warsh's first international debut (22:00 KST) — a policy panel with Lagarde and Bailey. As his first major international remarks, it's a stage where "the more he holds back, the harder the market listens."
• 🇺🇸 A compressed calendar — Thursday July 2's June jobs report (NFP +110–115K, unemployment seen at 4.3%) is the week's big event. Equities trade a regular full session on July 2 (only the bond market closes early, 2:00 p.m. ET); the next day, Friday July 3, is fully closed for Independence Day, running into a three-day weekend. With the jobs print landing into thin pre-holiday liquidity, position-squaring may compress.
• 🇰🇷 June trade figures (Ministry of Trade, today) — May exports posted double-digit growth led by semiconductors, and early-June preliminary figures also signaled strength. The actual numbers are pre-release.
• 🇰🇷 June CPI (around July 2) — prior +3.1%. Whether the high 1,550 exchange rate stokes prices is the variable in the Bank of Korea's math. The policy rate is held at 2.5% (an 8th straight hold); the next rate meeting is July 16.

Continuity — Yesterday's strong quarter-end momentum (AI, earnings, chips) gets tested on day one of the second half by the ISM print and the Sintra remarks. The risk converges on one place. The moment market focus shifts from "AI growth" to "sticky services inflation and a hawkish Fed," the strong dollar and high rates — propped up by firm labor demand (yesterday's JOLTS) — can press equities down. And if the ceasefire and oil calm seen above unwind and energy shocks again, that pressure only compounds.

🗓️ The Second-Half Roadmap — Where the Divergence Gets Settled

If the first half was "a high made over risk," the second half's question is where that divergence — the growth equities see versus the tightening bonds and the dollar see — gets settled. The calendar points to the places.

Three axes to watch in the second half

1. Rates — not "cuts" but "hike vs. hold." The conventional wisdom is "the Fed cuts soon," but the Warsh Fed raised its June dot plot to a hike and scrapped forward guidance. The second half's question isn't the timing of a cut but whether another hike comes — the September FOMC (dot plot) is where it gets settled. (Though "70% odds of a September hike" isn't confirmed; what is confirmed is ~60% for at least one hike this year and ~70% for a July hold. The houses are split too — BofA sees three hikes this year vs. JPMorgan's hold.)
2. AI capex durability = the lifeline for valuations. Hyperscaler capex, up +83% (754 billion dollars), underwrites half of the S&P's earnings growth. For a ~21x forward P/E and the crowding into leaders to be justified, Big Tech's July and October earnings have to answer the skepticism about "AI revenue durability."
3. Korea — verifying the "real numbers" on chips, and whether foreigners return. Whether the memory super-cycle that grounded the first half's strength is confirmed in numbers — Samsung Q2 (consensus ~84 trillion won), SK Hynix (~63 trillion), Q3 in October — is the crux. And for the foreigners who net-sold 26 trillion won to come back, the high 1,550 KRW/USD rate has to steady and the Korea–US rate gap has to narrow — that's the fork in the "KOSPI 10,000" story.

Q4 tail risk — the September 30 budget cliff (a ~44% shutdown priced in) plus the midterm elections (November 3). Under a divided government, fiscal gridlock is the base case. (The debt ceiling is not a second-half risk — that's a late-2027 issue.)

One-Line Close

The first half was "a high made over risk." The question on day one of the second half is simple — between the growth equities bought and the Fed path the dollar and rates pre-priced, where is the threshold at which those high rates and a strong dollar bite into valuations? The test lines are concrete. Whether today's ISM holds the 50 line, and whether KRW/USD breaches 1,550, are the first notches to touch that balance.