(Add prices, volume data, other details after market close)

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S&P, Nasdaq end quarter with double-digit gains

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Banking shares rise after Fed's stress test

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Indexes up: Dow 0.63%, S&P 0.52%, Nasdaq 0.48%

By Sabrina Valle

NEW YORK, June 30 (Reuters) - The S&P 500 and Nasdaq

reached record closing highs on Monday, capping their best

quarter in over a year as hopes for trade deals and possible

rate cuts eased investor uncertainty.

Both indexes ended the quarter with double-digit gains. The

S&P 500 gained 10.57% during the period, the Nasdaq rose 17.75%,

and the Dow climbed 4.98%. The Russell 2000 Small Cap index rose

8.28% in the quarter.

Still, the three main indexes posted their weakest first-half

performances since 2022, as the uncertainty around trade policy

has kept investors wary during the year, with tensions peaking

after President Donald Trump disclosed widespread tariffs on

April 2.

Trade deals with China and the UK have fueled optimism that

an all-out global trade war can be minimized, with hopes for

more deals to be reached before Trump's July 9 trade deadline.

The end of the quarter was also influenced by managers

tweaking their portfolios to look more attractive at

quarter-end.

"Animal spirits seem to have taken hold here," said Roy

Behren, co-president of Westchester Capital management fund. "It

is also quite common for the last couple of days of a quarter to

see strength because of the window dressing."

On Sunday, Canada scrapped its digital services tax targeting

U.S. tech firms, just hours before it was due to take effect, in

a bid to advance stalled trade negotiations with the United

States.

But U.S. Treasury Secretary Scott Bessent warned on Monday that

countries could still face sharply higher tariffs on July 9 even

if they are negotiating in good faith, and any potential

extensions will be up to Trump.

Meanwhile, U.S. Senate Republicans will try to pass Trump's

sweeping tax-cut and spending bill, despite divisions within the

party about its expected $3.3 trillion hit to the $36.2 trillion

national debt. Trump wants the bill passed before the July 4

Independence Day holiday.

Key economic data releases this week include monthly

non-farm payrolls and the Institute for Supply Management's

survey on manufacturing and services sectors for June.

Several U.S. central bank officials including Federal

Reserve Chair Jerome Powell are scheduled to speak later this

week.

A raft of soft economic data and expectations that Trump

will replace Powell with someone dovish have pushed up bets of

rate cuts from the Fed this year.

On Monday, nine of the 11 S&P indexes closed up. The Dow

Jones Industrial Average rose 275.50 points, or 0.63%, to

44,094.77, the S&P 500 gained 31.88 points, or 0.52%, to

6,204.95 and the Nasdaq Composite gained 96.28 points,

or 0.48%, to 20,369.73.

Shares of big U.S. banks rose after most cleared the Federal

Reserve's annual "stress test," paving the way for billions in

stock buybacks and dividends.

Leading the S&P 500 were Hewlett Packard Enterprise ( HPE ),

up 11.1 %, First Solar ( FSLR ) up 8.8 %,and Juniper Networks ( JNPR )

up 8.45 %.

"The current rally was driven by few heavyweight stocks that

drove indexes up, giving the market a sense of optimism despite

rising deficit and unresolved policy issues," said Cole Smead,

CEO and portfolio manager of Smead Capital Management.

"The stock market doesn't seem to care at all, people think

this party is going to go on forever," he said. "I think this

game is over. It's just a matter of when and how bad it gets."

Volume on U.S. exchanges was 17.12 billion shares, compared

with the 18.23 billion average for the full session over the

last 20 trading days.