Major averages closed higher for the quarter and the Dow posted its strongest first-half performance of the year since 1999. So far for the year, the Dow has surged more than 14 percent, while the S&P 500 and Nasdaq have spiked more than 13 percent each.
"History is a little bit in our favor—when you have a good first-half, the second half tends to show some follow through, but this may be a difficult year to figure out because we'll have the lag of sequestration, everyone trying to figure out where the Fed is going," said Art Cashin, director of floor operations at UBS Financial Services.
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On the economic front, manufacturing activity edged higher in June to 50.9, according to the Institute for Supply Management, a hair above expectations for 50.5. A reading above 50 indicates expansion in the sector. However, hiring in the sector fell to the lowest since September 2009.
And construction spending rose 0.5 percent in May to an annual rate of $874.9 billion, rising to its highest level in nearly four years, according to the Commerce Department.
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Japanese shares were boosted by a survey which showed corporate sentiment had turned positive for the first time in two years, as optimism about Prime Minister Shinzo Abe's radical stimulus policies offset concerns about recent market volatility.
"The risk is that the economy may be doing well enough that it actually dis-incentivizes the drive for structural reform. That would certainly lead to a dampening of market sentiment," said Alistair Newton, senior political analyst at Nomura.
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However, data from China showed that industrial activity continued to decline in June, amid concerns about overcapacity and weak demand.
"I think the story for China is basically that there is not any story left. Economic activity has peaked and we think that data will surprise on the downside," said Sailesh Jha, chief strategist at Arcus Capital Singapore.