U.S. markets closed mostly higher on Monday, June 2, 2025, with the Nasdaq Composite outperforming as tech stocks extended their recent rally. The day also saw the U.S. Dollar Index fall sharply, fueling investor optimism for continued equity strength and potential monetary easing by the Federal Reserve.

The Nasdaq rose 0.67% to 19,242.61, driven by gains in AI, cloud, and chipmaker stocks. The S&P 500 added 0.41%, closing at a strong 5,935.94, while the Dow Jones Industrial Average saw a more modest increase of 0.08%, ending at 42,305.48. Small-cap stocks also joined the rally, with the Russell 2000 ticking up 0.07%.

What’s New:

• Tech sector outperforms again, reinforcing investor confidence in AI-driven growth.
• U.S. Dollar Index tumbles 0.65% to 98.68, its lowest level in weeks, signaling expectations of looser monetary policy.
• Volatility continues to decline, with the VIX edging down 0.21% to 18.53, supporting a risk-on environment.

Tech Surge Lifts Nasdaq

The Nasdaq led Monday’s gains as investors continued to pour capital into high-growth sectors, especially artificial intelligence and cloud computing. Names like NVIDIA and Microsoft saw renewed interest, contributing to tech’s outsized gains in 2025. Analysts point to sustained earnings growth and optimism around productivity gains from generative AI as major catalysts.

The S&P 500 benefitted from strength in tech, consumer discretionary, and select industrials. Though energy lagged, the broader index remained buoyed by strong corporate balance sheets and lower borrowing costs.

Dollar Weakness Supports Equities

The U.S. Dollar Index saw a sharp drop, falling to 98.68, its lowest point in over a month. The move came amid speculation that the Fed could begin easing rates by Q4 2025, following signs of cooling inflation and softening wage pressures. A weaker dollar tends to favor U.S. exporters and helps boost earnings for multinationals, making the equity market more attractive.

International Markets Mixed

Canada’s S&P/TSX Composite Index gained 0.82%, finishing at 26,388.96, thanks to rising prices in commodities and a stable financial sector. In contrast, Brazil’s IBOVESPA fell 0.29% to 136,624.62, as political gridlock weighed on market sentiment and concerns over fiscal discipline resurfaced.

What Investors Are Watching

Looking ahead, all eyes are on this Friday’s U.S. jobs report for May, which could influence expectations for the Fed’s next move. A stronger-than-expected report might delay interest rate cuts, while weaker data could accelerate the timeline.

Fed speakers scheduled throughout the week will also be closely watched for clues on policy direction. Markets are currently pricing in a 50% probability of a rate cut by September, depending on upcoming data.

Market Sentiment: Cautious Optimism

The combination of softening inflation expectations, a declining dollar, and solid tech earnings is helping support current equity levels. While geopolitical tensions and macro risks persist, investor appetite for risk appears stable, as evidenced by declining volatility.

The tone remains cautiously optimistic going into the second half of the year. If current trends continue, U.S. markets may see further upside, particularly if the Federal Reserve signals a dovish shift and macro indicators remain stable.